While Rupee hit record low, these 5 currencies plunged more against dollar

Not Rupee but currencies of these five countries namely South Africa, South Korea, Thailand, Indonesia, and China have declined at higher rates between June 1 and June 28. However, the Indian rupee is in the top five currencies in terms of the magnitude of depreciation, CARE Ratings report said. After following a decline for the past few days, the Indian rupee closed higher at Rs 68.46/47 against US dollar on Friday. This comes after days of its decline including currency hitting an all-time closing low of Rs 68.69 on Thursday against the earlier closing low of 68.73 on November 24, 2016. Since April 2018, the rupee is on a decline. The weakening in rupee in the last few days has created panic in the market causing the RBI to intervene.

Here are the 3 main reasons behind this free fall against the dollar:

Crude oil prices: The prices of crude oil have risen for nearly 40 percent in past one year. “Higher oil prices have also led to the fall in the rupee. While OPEC has agreed to increase output it does not compensate for the production cuts invoked earlier. This has further pushed down the rupee,” CARE Ratings said.

Iran oil imports: The latest US warning to all the nations including India to cut all trade ties with Iran is also weighing on the currency. “The Indian government has to take a decision on whether or not to follow the US in severing ties with Iran which includes moving imports of oil away to other nations. Iran is the third largest supplier to India and while such imports can be substituted from other countries, the benefit of rupee trade would no longer be available, the report said.

US dollar strength: The US dollar gets strength as bond yields rise underpinned by the two likely interest rate hikes next year. “The stronger dollar can be attributed to factors such as higher growth, lower unemployment, higher rates, fiscal spending by the government, lower taxes for corporates and the talk on curing unequal trade policies pursued by other countries,” the rating agency said.

Rupee level

The rating agency said that the rupee should be around 68/$ but every additional rupee increase to Rs 69/$ or Rs 70/$ will be testing the RBI’s level of comfort to find support. The imbroglio over Iran and sanctions and the decision taken by the Indian government could hold the clue here, the agency said. Mainly, the rupee fall is related to the sentiment-driven reasons.

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Reference By- https://www.financialexpress.com/market/while-rupee-hit-record-low-these-5-currencies-depreciated-more-against-dollar/1226162/