Winning Bizness Desk

Mumbai. Rupee touched a record low on July 19, 2022 by opening weak by 4 paise against the dollar today. The record low against the dollar opened at Rs 80.01 per dollar. A day earlier, the rupee had closed at 79.97 against the dollar. The rupee has lost more than 2% in the last one month. At the same time, in one year, the rupee has fallen in front of the dollar by 7.4% in one year. Most currencies in the foreign exchange market are compared against the dollar.

Govt blames crude oil prices

Finance Minister Nirmala Sitharaman gave reasons for the breakdown of rupee in Lok Sabha. She said that global factors like Russia-Ukraine war, rising crude oil prices and tightening global financial conditions are the main reasons for the weakening of the Indian rupee against the US dollar.

Many reasons for currency fluctuations

There are many reasons for currency fluctuations. If the value of any other currency decreases in comparison to the dollar, then it is called falling, breaking, weakening of that currency. In English - currency depreciation. Every country has reserves of foreign exchange, from which it conducts international transactions.

The decrease and increase of foreign exchange reserves determine the movement of the currency of that country. If the dollar in India's foreign exchange reserves is equal to the US rupee reserves, then the value of the rupee will remain stable. If the dollar decreases with us, the rupee will weaken, if it increases, the rupee will strengthen.

Loss or advantage?

Disadvantage: Import of crude oil will be expensive, which will increase inflation. Vegetables and food items will be expensive in the country. On the other hand, Indians will have to pay more to get dollars making travel and studying abroad expensive.

Benefit: Exporters will be benefited, because the payment will be in dollars, which they will be able to earn more by converting them into rupees. This will benefit IT and pharma companies selling goods abroad.

Dollar chosen as the reserve currency of the world

Most currencies in the foreign exchange market are compared against the dollar. Behind this is the 'Bretton Woods Agreement' during the Second World War. It was proposed to create a neutral global currency. However, then America was the only country that had emerged economically strong. In such a situation, the US dollar was chosen as the reserve currency of the world.