With the Global economy undergoing a severe breakdown, the Rupee has plunged further to 39 paise against the US dollar at 66.85 on Monday. The severe fall in Rupee has been identified at 5% so far but still it remains the strongest currency among other BRICS nations (BRICS is the acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa).
The Indian currency on Monday shed 0.54% and hit a new low of 66.86/$ but at the end of the day it settled down to two-year low of 66.83/$. A simple formula that states that it is the strong dollar demand in bank that has lead to a fall in the rupee. It all settled with a low Sensex and Nifty and saw a comparatively lower mark from last 15 months and has now nestled down with a weakest level in two months.
Ananth Narayan G, regional head of financial markets for South Asia at Standard Chartered Bank, notes that the latest jobs data from the US did little to provide clarity, “The data was mixed and that was a bit of disappointment,” Narayan said.
The global attack on economy indicate towards China’s devaluation of the Yuan has been responsible for the severe change in the valuation of the currencies around the globe, and in India a severe low from past two years was attained on Monday. It is also factoring the unemployment in the largest economy of the world that is US from January 2013 that is creating a devastating scenario all over the world.
India has faced this depreciation in Rupee by 5.56% since January, but the tremendous depreciation has been noticed from past one month after the devaluation of China’s currency Yuan.
It’s not just India but also other BRICS nation have emerged affected and are facing a huge depreciation in their respective currencies. So far the currencies massively affected due to the Chinese Yuan — Brazilian real, Russian ruble and South African rand — all have depreciated more.
A CRISIL report states, “Given the ample foreign exchange reserves to combat the volatility in the rupee — the Reserve Bank of India had close to $354 billion in foreign exchange reserves as of 14 August 2015 — the rupee will be range bound.”
However, majority of the the economists analysing the market are of the opinion that the devaluation of the Rupee may help exports and imports, further helping the India economy bounce back.