The rupee hit a one-and-a-half-year low against the dollar

MUMBAI: The Indian rupee weakened for the past one month on Tuesday. Today, the rupee hit a 15-month low against the dollar in July 2020. At the end of the session, the rupee had lost 18 paise to close at 6.5 against the dollar. At one point in the session, it had dropped to 7.5. The rupee has depreciated by 2.4 per cent against the dollar in the past one month, the weakest against the dollar in all Asian currencies since the yen.

For an economy like India, the weakening of the local currency against the dollar is a matter of concern as the country's imports exceed its exports. That is, people depend on imported goods for domestic consumption. India's major imports include crude oil, cooking gas, coal chemicals, pharmaceuticals, bulk drugs, edible oils.

As the rupee weakens, imports of these items become more expensive and this can lead to higher inflation. In times of hardship in Corona, when the population is plagued by inflation, the growth of the currency in this way can be a major problem. For the quarter ended September, the country's trade deficit widened by 2.7 per cent to 2.7 billion.

The main reason for the widening trade deficit is rising prices of imported goods. In this scenario, the rupee's weakening against the dollar is unlikely to keep the deficit high. Global crude oil prices are at a seven-year high.

Investors are turning to cash, selling shares and other assets, fearing an energy crisis in various countries and a softening of the economy. The US dollar continues to appreciate due to this rush of cash. Concerns that inflation will rise in India and the US are pushing up government bond yields and its tax dollars.

Not only is there a huge supply of dollars in India through investment and stock market channels, but the dollar is also rising in India and the rupee is weakening as demand for the dollar is rising in terms of trade (imports and exports). The dollar was the most attractive currency in the global market during the Corona, global lockdown and economic downturn. In April 2031, the Indian currency hit an all-time low of 7.5. But gradually the rupee rose as the economy rebounded. The rupee had closed at 6.7 against the dollar in December.

Top imports for India

Crude Oil, Coal, Cooking Gas, Gold, Organic and Inorganic Chemicals, Bulk Drugs, Coal, Pearls, Diamonds, Jewelery, Telecom Equipment, Electric Equipment, Edible Oil, Computer Hardware, Plastic Materials, Steel, Fertilizer, Oil, Fertilizer, Auto parts, auto machinery, cashews, nuts, fresh fruit, rubber, etc ...