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Rupees vs Dollar: In the interbank foreign exchange market, the dollar reached its lowest level ever on Wednesday. It fell by three paise on Wednesday and reached a record low of 84.94 (temporary). The rupee had closed at 84.91 per dollar on Tuesday while it had opened at 84.92 per dollar on Wednesday. During the day’s trading it came down to 84.95 per dollar and finally fell by three paise to close at its all-time low of 84.94 (provisional) per dollar.
Impact of Fed’s decision on the economy
Today in the meeting of the US central bank Fed Reserve, it can cut its benchmark interest rate by 25 basis points i.e. 0.25 percent. If the Fed makes any change in interest rates, it will have a direct impact on the global economy. This will affect the stock market as well as investors.
Trump’s tweet on tariffs creates panic
According to the CME Fedwatch tool, 97.1 percent of investors are betting on stocks with a 25 bps cut by the Fed on Wednesday. On the other hand, the probability of no change in Fed policy is less than 3 percent. Kunal Sodhani, vice president of Shinhan Bank, while talking to Money Control, said that the weakening of the Chinese yuan will put pressure on the rupee.
US President Donald Trump’s tweet on tariffs is already putting pressure on Asian currencies. This also includes rupees. News agency PTI quoted Trump as saying, “If they tax us, we will tax them equally.”
Trump said, “India charges us 100 or 200 percent duty on some products. If they send us bicycles, we also send them bicycles, yet they impose heavy taxes on us while we do not take anything from them. Now this rule is going to change.”
Indian currency rupee under pressure
The rupee is also under pressure due to the exit of foreign investors and trade losses in November. The country’s economic growth rate remained slow in the second quarter of the current financial year. During this period, the gross domestic product (GDP) stood at 5.4 percent. The devaluation of the rupee is a matter of concern for the Reserve Bank of India (RBI), which is being forced to intervene in the currency market, depleting valuable foreign exchange reserves.
reduction in foreign exchange reserves
India’s foreign exchange reserves have declined by more than $46 billion in the last two months. RBI data shows that on December 6, foreign exchange reserves fell to $654.857 billion, while on October 4 it was $704.885 billion. In the week ending October 4, foreign exchange reserves were continuously increasing due to RBI intervention in the foreign exchange market. The rupee has fallen by about 2 percent against the dollar so far this year.
