Indian currency moves sluggish against dollar, know 5 reasons for rupee weakness

New Delhi After the deepening havoc of Corona and the decision of the Reserve Bank of India, the movement of the domestic currency rupee has weakened. In the last session, the domestic currency recorded the biggest single day decline since August. Experts say that the rupee can again cross 75 rupees per dollar. At the spot, the rupee closed at Rs 74.55 per dollar, a fall of Rs 1.12, or 1.53 per cent, from the previous session on Wednesday against the US dollar.

Anuj Gupta, vice-president (currency and energy research), IIFL Securities, said that restrictive measures like lockdown in various cities have weakened due to recurrence of corona outbreak in the country. He said that the domestic currency can be seen between 75 to 75.50 rupees per dollar.

On the other hand, the indications that the Reserve Bank of India will continue to adjust the monetary policy further, also showed the effect on the domestic currency. The rupee recorded its biggest one-day fall since August after the results of the RBI monetary policy review meeting. The rupee has fallen to a four-month low against the dollar.

Ajay Kedia, director of Kedia Advisory, said that the movement of domestic currency has slowed due to the havoc of Corona as well as the flow of foreign capital due to global reasons.

These are the main reasons for weakness in domestic currency:

1. There is a possibility of slowing down of the economy due to the outbreak of Kovid-19.

2. Reduction in foreign capital inflows due to increase in 10-year bond yields in US and strengthening dollar.

3. The central bank has announced to purchase one lakh crore bonds from the secondary market during the quarter under GSAP.

4. Increase in growth of foreign institutional investors in the capital market of the country.

5. The impact of the rise in crude oil because the pressure on crude currency is natural due to increase in dollar demand for oil import due to expensive crude oil.



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