1. US rules out bailout for Silicon Valley Bank, auctions reportedly underway 2. Apple CEO Tim Cook backs AR/VR headset, likely to launch this year 3. Infosys’ Mohit Joshi joins Tech Mahindra as MD and CEO

What if the rupee hits 80 against the US dollar?

US dollar-thefreemedia
Spread the love

On Thursday, the rupee closed at 79.88 against the US dollar, just shy of the psychological 80-level. The Indian currency has plummeted since the outbreak of the Russia-Ukraine war in February.

However, it is critical to comprehend what happens if the rupee reaches 80 against the US dollar.

So, what happens if this scenario comes true?

Claim Free Bets

Imports become more expensive when the value of the dollar rises. Importers must pay more for the same amount of money. Because most international trade is conducted in US dollars, importers must pay higher prices.

Exports become less expensive as the rupee falls in value. When the value of the dollar rises, exporters receive more money in exchange for the same amount of US dollars. This results in higher profit margins.

The current account deficit is growing: A current account deficit (CAD) is the difference between the proceeds from selling goods to a foreign country and the proceeds from purchasing goods from a foreign country. Because the country imports more goods than it exports, the fall in the rupee causes the ‘deficit’ to rise. India is already dealing with CAD issues. This fiscal year, it is expected to reach $105 billion, or 3% of GDP.

Higher inflation: As the value of the currency falls, imports become more expensive. This raises the prices of raw materials and, as a result, the selling prices. As a result, people will pay more for the same goods.

What is the RBI doing to stop the rupee’s fall?

The Reserve Bank of India (RBI) is taking a number of steps to stabilize the rupee’s value. It has been selling US dollars in open markets using its foreign exchange reserves. This increases the supply of the US dollar in the market, lowering its value. It does, however, result in the depletion of foreign reserves. Since February 2022, India’s forex reserves have been depleted by Rs 1 trillion.

In addition, the RBI has proposed a rupee settlement mechanism. Under this arrangement, foreign companies can make foreign payments in rupees rather than US dollars. This is expected to reduce the demand for US dollars in international trade, thereby stabilizing their value.



    All Posts

    Related Post

    View All

    World Hindi Day 2022 celebrated globally

    January 10th, 2022 | Ankita Deshkar

    Spread the loveWorld Hindi Day is celebrated on January 10 since 2006 to promote the language at the global stage. The day...

    Apple touts iPhone 13 filmmaking prowess with Twitte...

    September 18th, 2021 | THE FREE MEDIA

    Spread the loveTech giant Apple has introduced a Twitter “hashflag” to promote the filmmaking capabilities of ...

    RIVM – Omicron advancing rapidly in the Nether...

    December 21st, 2021 | Ankita Deshkar

    Spread the loveInfections involving the Omicron variant are still in the minority for now, but are increasing rapidly. The...