Due to the cost of crude oil in the international market and the strengthening of the dollar, the rupee is depreciating continuously. Against the dollar, it is near 76 rupees. However, it remains above the so far low of 76.87 against the dollar in April last year. This makes importing expensive.
IFA Global Research Desk has told in a report that there are many reasons for the fall in the rupee. The biggest reason among these is the cost of crude. This pushed the trade deficit to around $23 billion in September.
Gold price fell below 3-month high, silver rate also declined
Earlier this week, London Brent oil touched a three-year high at $84.38 a barrel. New York’s WTI crude is at a seven-year high at $81.71 a barrel.
Supply has been affected due to non-increasing production by OPEC, an organization of crude producing countries.
The strengthening of the dollar also put pressure on the rupee.
Analysts say that the credit crisis in China and fuel shortage in many countries will impact emerging markets more. There is a possibility of economic slowdown in these markets. Apart from this, there can also be credit default and delay in repayment of loans to International Financial Institutions including IMF.
Another reason for the fall in the rupee is the continuation of monetary policy relaxation by the Reserve Bank of India (RBI). This is driving inflation and reducing the attractiveness of real rates in the country as compared to other emerging markets.
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