Falling Rupee Value: Causes And Consequences

Investors are wary with markets being volatile.

- Suyash Desai

The Indian rupee has been one of the worst performing currencies in recent times. It has weakened over eight percent against the dollar since January 2018 as well as against a few other foreign currencies.It has plunged 9.7 percent against the Yen, 4.5 percent against the Euro and 5.2 percent against the Pound. The rupee rate against the dollar at the beginning of the year, (January 1 2018) was 63.6697. According to the Reserve Bank of India (RBI)’s latest update, the rupee has been hovering around the 69 mark.

Structural factors like rise in oil prices, uncertainty over trade war between China and the US, ambiguity over sanctions by the US on Iran, increase of interest rates by the Federal Reserve System, coupled with domestic factors like deteriorating macro-economic conditions such as increase in current account deficit, pressure on achieving fiscal deficit, and concerns over withering of Foreign Portfolio Investments (FPI) have all resulted in depreciating value of Rupee.