Rocky Start For The Reserve Brings Down Rupee Against The Dollar

Forex investors distastefully observed the market as the elevated crude oil prices paired with the low performing domestic equities dropped the Rupee against the Dollar by 0.19 paise. Luckily the investors were given a break as the dollar’s value fell after the dollar index showed a fall of 0.11% against 6 other currencies, raising the Rupee’s value by 0.03 paise. This left the partially convertible Rupee stable at 73.92 per Dollar.  The weakening of the dollar index was unexpected as the US Federal Reserve is expected to raise interest rates multiple times over the course of CY22. Clarity about the situation was given when further comments from the Federal chair Jerome Powell indicated that their balance sheet will need time to cut down itself.

Due to the Pandemic, the Federal Reserve's introduction of limitations of finance in the global banking system has left the system to possess an immense amount of liquidity. This gave investors a reason to finance many profitable assets present in India, owing to the all time low interest rates in the US. The crude oil prices marked up by the presence of omicron, and the increasing inflation rate in India shows the RBI’s tough management decisions to make in these following weeks. The predicted settlement of the rupee being Rs. 74/$1 in the near term said “forex dealers on account of being anonymous”. In regard to crude oil, The New York Mercantile added $1.42 per barrel leaving it at $84.67, similarly, Brent crude marked their prices by $0.95 leaving it at $84.67 per barrel. India being the third largest importer and consumer of crude oil negatively impacts it’s projected accounts and inflation. 
Collated by Arjun Kulkarni, and written with input from Economic Times and Money Control
Arjun Kulkarni