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Rupee Extends Decline Against US Dollar Today: 5 Things To Know

IFA Global expects the rupee to trade between 65/dollar to 65.25/dollar in the near term.

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Rupee Extends Decline Against US Dollar Today: 5 Things To Know
The Indian rupee (INR) weakened today by another 13 paise to 65.16 against the dollar amid increased demand for the US currency from importers. On Tuesday, the rupee plunged by 35 paise to end 65.03 a dollar amid a selloff in Indian stock markets.  Global crude oil prices have spiked after political upheaval in Saudi Arabia, raising concerns over its impact on domestic economy. The political upheaval in Saudi Arabia also spurred concerns of Middle Eastern money pulling out of global financial markets. Despite recent weakness in the rupee, the Indian currency has rallied against the US dollar this year. It is up over 4 per cent against the US dollar so far this year. Strong inflows into Indian debt market and optimism about economic recovery helped the rupee's rally against the dollar this year. 

5 Things To know About Rupee's Decline Against Dollar Today


1) Some analysts have raised concern about domestic inflation outlook and its impact on domestic economy after global oil prices surged to over two year highs. Ajay Bodke, CEO and chief portfolio manager at domestic brokerage Prabhudas Lilladher said, "India needs to keep a cautious eye on the surge in global crude prices as every $1 per barrel rise in crude prices leads to its import bill rising by $ 1.33 billion. Also, a rising import bill can put downward pressure on rupee." 

2) Forex advisor IFA Global said the spike in global oil prices is likely to weigh on domestic stock markets and the rupee. The Sensex fell over 350 points on Tuesday while the index was flat in early trade today. 

3) IFA Global expects the rupee to trade between 65/dollar to 65.25/dollar in the near term. 

4) India's import bill rises by $1.03 billion for every one rupee weakening in rupee vis-a-vis US dollar, Mr Bodke added. "In a fiscally constrained environment a weakening rupee can also lead to higher fiscal deficit if the government decides not to allow OMCs (oil marketing companies) to hike petrol and diesel prices for consumers and decides to absorb the increased fuel import bill."

5) Higher global crude oil prices could also lead to prices of crude derivatives moving up impacting the raw material costs of companies across the sectors and leading to margin pressure. "An exuberant Indian equity market needs to digest the far-reaching implications of the grave geo-political developments unfolding in the Middle-East seriously," Mr Bodke said. (With Agency Inputs) 


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