Russia-Ukraine War Forces Indian Rupee To Fall To Record Low Of 76.98 Per Dollar
In opening trade on Monday, the rupee declined 81 paise to 76.98 against the dollar as investors sought safety in the greenback as geopolitical risks intensified due to the Russia-Ukraine conflict. As tensions escalated between Russia and Ukraine, foreign exchange traders grew increasingly concerned about rising inflation and a widening trade deficit.
A lackluster trend in domestic equities and sustained foreign fund outflows also dampened investor sentiment. The Indian rupee opened at 76.85 against the US dollar, but slipped to 76.98 after the final close, losing 81 paise.
As of Friday, the rupee fell by 23 paise to close at 76.17 per dollar, the lowest closing level since December 15, 2021. Consequently, the dollar index, which measures the strength of the dollar against a basket of six currencies, rose 0.29 per cent to 98.93.
Global benchmark Brent crude futures rose 9.38 percent to USD 129.19 per barrel. As crude oil prices rose along with the dollar this morning, the Indian Rupee took a hit, said Sriram Iyer, senior research analyst at Reliance Securities.
Impact on Indian Economy:
The falling rupee puts pressure on foreign exchange reserves.
Foreign investors will be discouraged from investing in the country due to its weak and fluctuating currency. This will lead to a slowdown in Foreign Direct Investment (FDI) inflows into India. There will be an outflow of capital from India in the event that some investors sell their holdings. This will further erode demand for the rupee. That will lead to further depreciation.