Indian Rupee hits all-time low of 83.14 against US Dollar
What's the story
The Indian Rupee (INR) reached a record low of Rs. 83.14 against the US Dollar (USD) today.
Forex traders have attributed the depreciation of our currency to the USD's six-month high and rising oil prices, which weighed heavily on the INR.
To note, INR earlier hit its lowest level of Rs. 83.13 against the USD on August 21 this year.
Details
Dollar strength and oil prices pressure INR
The dollar index, measuring the greenback's strength against six major currencies, rose to 104.73. Meanwhile, Brent crude futures, which is the global oil benchmark, declined 0.67% to $89.44 per barrel.
Analysts predict that foreign institutional investor (FII) outflows and increasing crude oil prices might further pressure INR.
However, potential intervention by the Reserve Bank of India (RBI) and expectations of no rate hike by the Federal Reserve in its September FOMC meeting may provide support for INR at lower levels.
Problem
Retail inflation saw a 15-month high in July
Back in July, retail inflation surged to a 15-month high of 7.44% due to a spike in food prices. The previous high of 7.79% was recorded in April 2022.
This inflation coupled with a weakening rupee, could have a negative effect on our purchasing power.
The government may need to reduce spending or increase taxes to compensate for the increased import bill, further impacting the economy.