The Indian rupee dropped to an all-time low of 70.8100 against the US dollar on Thursday morning, 30 Aug 2018, which experts are blaming on an increase in the costs of oil, heavy end-month dollar demand in imports, and economic concerns regarding investment in emerging markets.
The recent decline in the Turkish lira initiated a surge of foreign investment withdrawals from emerging global markets, which resulted in a chain reaction, negatively impacting the Indian rupee as well as the Argentine peso and the Chinese yuan. In fact, the Argentine peso fell by 7 per cent on Thursday– the most devastating one-day drop the country has witnessed since 2015.
On Wednesday, the Indian rupee dropped to 70.475 against the US dollar due to a high demand for foreign capital outflow, which accumulates at the end of each month. Importer’s dollar demand posed as a challenge to India’s economy this month in part because of a trade deficit that has been increasing since the beginning of the year, that just reached $18 billion. This means India is importing $18 billion more than what they are exporting– a scarily unsustainable ratio. This is also a result of oil refinery costs skyrocketing from an inflation in the cost of raw petroleum; oil has increased by nearly 10 per cent in the past two weeks, according to an article released today by OilPrice.com.
The Indian rupee has dropped by 10.97 per cent since January, and the Wealth Management Report released by the Deutsche Bank anticipates that the rupee will continue to decline to 74 to the US dollar by Summer of 2019, CNBC reported on Thursday.
What does this mean for you?
This poses a great threat to individuals and companies who send money from India regularly. It’s important that those who need to send money do it now before currency rates decline further. The currency crisis has caused India’s foreign exchange reserves to see a great degree of flux in such a short amount of time. Although, some parts of the world have agreed to increase the amount of oil production, which is predicted to keep oil prices within an affordable range for the rest of the year.
However, the declining Rupee is a great opportunity for those who are sending payments to India and for Indian exporters receiving payments in US$ as they get more Rupees for every US Dollar. The same goes for those who are sending remittance to family in India. REMITR is making it easy every single day, to make your invoice payments to India and to several other countries.