You would be wondering why nowadays Dollar is becoming stronger against Indian Rupee day by day, to know this reason we have to go in deep, so let us start from the beginning.
Till the 17th century, INDIA was ruled by kings who were very rich and have a huge amount of gold and precious items with them so INDIA was a very rich country at that time and was known as GOLDEN BIRD.
In the early 17th century Britishers came to India for trading and on 31st December 1600, EAST INDIA COMPANY was founded. But soon they started ruling in INDIA and damaged the Indian economy heavily.
On 15th August 1947, INDIA got independent. At that time 1INR₹ = 1 USD💲. The Indian economy was very weak and in poor condition, but the British economy was very strong so they keep on developing but it took time for INDIA to recover all the losses, that's how Indian Rupee fall and became equal to US Dollar.
SO HOW DOLLAR BECAME STRONGER?
It's like a race in which INDIAN RUPEE AND DOLLAR has started from the same point means the same value that is 1 INR₹ = 1 USD💲(in the year 1947), now in this race dollar has gone up faster than rupee so DOLLAR has become stronger against the INDIAN RUPEE so much that 1 USD💲= 73.6105 INR₹ (as on 29 Oct 2018).
WHY DOLLAR BECOMING STRONGER AGAINST INDIAN RUPEE DAY-BY-DAY?
There could be many reasons like when domestically produced goods cost more than imported goods than our import of such goods increases which requires dollar for payment of purchases, similarly when we like international goods or goods of other countries our import increases which make our currency weak against other as we demanding other currency more than the rupee, similarly some of the main reasons are:
1. Rising crude oil prices are putting pressure on the rupee as India imports more than 80% of its crude oil requirement. Tight supply and geopolitical concerns, global crude oil prices have made a gap of the $80 dollar mark. In the past 12 months alone, crude oil prices are up 50 percent, supported by supply cuts from major oil-producing countries.
2. Though petrol and diesel prices in the country are market-determined, the government still provides a subsidy for kerosene and cooking gas. According to estimates of global financial services major Nomura( a Japanese financial holding company), every $10 per barrel rise in the price will impact India's fiscal balance by 0.1 percent and current account balance by 0.4 percent of GDP.
3. Every $10 per barrel hike in crude oil price could also increase domestic retail inflation by 0.6-0.7 percentage points, Nomura estimates.
4. Some analysts have said that the RBI may adopt hawkish commentary, highlighting upside risks to inflation.
5. Global funds, according to Bloomberg estimates, have pulled $3.5 billion from Indian bonds so far this year. India needs robust dollar inflows to help bridge its widening current account deficit and support the rupee, say, analysts.
6. The dollar's broad surge against other major currencies has also hurt the rupee. The yield on the most widely watched bond rate in the world - US 10-year Treasury notes - hit the 3 percent threshold on expectations of faster Federal Reserve rate hikes and optimism about US economic growth. Higher US rates tend to boost the dollar.
7. Meanwhile, domestic petrol and diesel rates have been hitting new highs amid weakness in the rupee.
8. This has led to pressure on the government for cutting excise duty to bring down the fuel prices. But cutting taxes could stretch government finances.
1. Rising crude oil prices are putting pressure on the rupee as India imports more than 80% of its crude oil requirement. Tight supply and geopolitical concerns, global crude oil prices have made a gap of the $80 dollar mark. In the past 12 months alone, crude oil prices are up 50 percent, supported by supply cuts from major oil-producing countries.
2. Though petrol and diesel prices in the country are market-determined, the government still provides a subsidy for kerosene and cooking gas. According to estimates of global financial services major Nomura( a Japanese financial holding company), every $10 per barrel rise in the price will impact India's fiscal balance by 0.1 percent and current account balance by 0.4 percent of GDP.
3. Every $10 per barrel hike in crude oil price could also increase domestic retail inflation by 0.6-0.7 percentage points, Nomura estimates.
4. Some analysts have said that the RBI may adopt hawkish commentary, highlighting upside risks to inflation.
5. Global funds, according to Bloomberg estimates, have pulled $3.5 billion from Indian bonds so far this year. India needs robust dollar inflows to help bridge its widening current account deficit and support the rupee, say, analysts.
6. The dollar's broad surge against other major currencies has also hurt the rupee. The yield on the most widely watched bond rate in the world - US 10-year Treasury notes - hit the 3 percent threshold on expectations of faster Federal Reserve rate hikes and optimism about US economic growth. Higher US rates tend to boost the dollar.
7. Meanwhile, domestic petrol and diesel rates have been hitting new highs amid weakness in the rupee.
8. This has led to pressure on the government for cutting excise duty to bring down the fuel prices. But cutting taxes could stretch government finances.
