Rupee is depreciating due to the external factors and that there is nothing at this stage to worry about”, said the Economic affairs secretary Subhash Chander Garg on Tuesday when the value of rupee turned to all time low till date at 70.08 per dollar in intra-day trading as per the report of news agency PTI. The reason for this weakening is the tumbling down of the Turkish currency ‘lira’.
Turkey’s currency and the stock market kept on falling down on Monday as a result of country’s economic policies and the worsening relations with the United States. Ultra low interest rates in US and Europe encourages the industries in Turkey to borrow funds from outer nations. This resulted in percent growth in the sector and now the US Federal reserve is raising the rates. That draws capital away from Turkey, weakening the currency.
It is in June this year that rupee had hit low to 69.01 against the US dollar. Consistent demand for dollar from the importers and oil refiners had kept the rupee under pressure. However, this time it is the external activities affecting the value of rupee and getting it to the lowest till date. The economic analysts further estimate more depreciation in the currency. Broader emerging market currency movement, dollar strength and trend in the crude oil prices will continue to pressurize the currency in India.
“The RBI is likely to assess the trend in the rupee vis-a-vis the Emerging Market (EM) currency pack. If all EM currencies are depreciating, the rupee must weaken to protect export competitiveness.” said Aditi Nayar, principal economist at ICRA Ltd. “The chaos in Turkey has led investors to pull back from asset classes that are considered risky and emerging market currencies have suffered the most,” Religare Broking said in a note.
Meanwhile Congress president Rahul Gandhi has made a twitter move to make this event a political agenda for the up heading elections. “The Indian #Rupee just gave the Supreme Leader, a vote of NO confidence,crashing to a historic low.”, he tweeted. Further has passed a sarcastic comment saying “Listen to the Supreme Leader’s master class on economics in this video, where he explains why the Rupee is tanking” referring to trending old speech of Modi in 2013 when rupee was declining. Modi in opposition at that time, claimed UPA’s corruption to be the reason for weakening rupee.
Now it will be interesting to note the strategies in action by the ruling as well as the Government in opposition.