The Big Picture – Rupee Crash: Is it due to international factors?
Summary:
Indian rupee has been going through some difficult times for the last one and half years.
After having reached unprecedented lows last year touching over 68 rupees to a dollar, it had regained some ground earlier this year. However, it has once again started plunging.
The fact that the Sensex has been on the upper trend till recently, even when the rupee fell makes it interesting.
Now with global crude oil prices plunging to new depths every day, the rupee fall needs to be understood.
The volatility in rupee is largely due to the variations in the International financial market.
Domestic markets are tracking the developments in the major economies like Russia and the U.S.
The same of kind of disturbance is expected in the coming days until the oil and commodity markets are stabilised.
Domestic factors responsible for the volatility:
- Widened CAD or Trade deficit.
- Sensex overvaluation.
Action of RBI in mopping up dollars has also resulted in value of the rupee coming down.
Rise in Gold Imports, iron ore imports and coal imports have also added to the problem.
Russia’s rouble crisis is expected to have an impact.
Government’s intervention is also being sought to arrest further fall.
