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As the US dollar continued its relentless rise against other major currencies, the Indian rupee today hit a record low for a fourth straight session  The rupee today fell to new low of 79.74, breaching previous low of 79.66 it had hit in the previous session.

The keenly awaited consumer price index (CPI) inflation in the US came at a blistering 9.1 percent in June, the highest since November 1981. Months of soaring inflation have rocked global markets. Wednesday's CPI reading was followed by speculation the Fed could hike borrowing costs a full percentage point at its next meeting this month.

How a weakening rupee will impact investors 

Asheesh Chanda, Founder & CEO, Kristal.AI, a global wealth advisory platform says that it is a clear sign that global investors are choosing the safety of US markets over the recession risks of the EU. The impending threat of Russia cutting off gas supplies in winter coupled with the slow intervention by the ECB to control inflation, means that the recession in the EU looks imminent. Hence investors are selling Euros and buying dollars. It also reinforces the importance of USD as the safest currency during times of uncertainty. 

Advise for Indian investors amid weakening rupee

"As an Indian investor, one would be well advised to dollarize their investments as even rupee is expected to decline further this year," said Asheesh Chanda.

What does a weaker rupee mean for you?

  • The biggest impact of a weakening rupee is on inflation. India imports more than 80% of its crude oil. Oil has been hovering around $100 a barrel for more than two months now and a weaker rupee will add to inflationary pressures. 
  • As payments for imports are made in dollar terms, a weaker Rupee would drive up the price of importing goods.
  • A weaker rupee will worsen the problem of inflation. Consumers will have to shell out much more for products which are imported.
  • India is also heavily dependent on other countries for fertilizers and edible oils. 
  • Indian firms have been borrowing from the offshore dollar market, and the stock of commercial borrowing stood at $226.4 billion at the end of December 2021. Interest repayments are, therefore, expected to swell. 
  • With the rupee witnessing a record fall against the US dollar, those remitting money from abroad to India will have to spend more.

 

 

 

 

 

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