Indian Rupee hits historic low against US Dollar, hits 71-mark; what will be the impact

The Indian Rupee hits a momentous low of 71 against the US dollar in the morning trade Friday. In the morning trade, the Rupee fell 22 paise at 70.95 per dollar versus Thursday's close of 70.74.

The Rupee has plunged 3.3 per cent in August and nearly 10 per cent as yet this year, thus making it the worst-performing currency in Asia.

Yesterday the Indian rupee breached the 70/USD-mark, which shocked and surprised the market. According to experts the weakness is attributed to dollar strength and rising crude oil prices.

Check - Dollar to INR

Analysts expect that if the current situation continues rupee will hit the 72 level per dollar. Signs of warning can already be perceived on the stock market and the economy.

According to VK Sharma, Head Private Client Group & Capital Market Strategy at HDFC Securities said, “Indian Rupee has depreciated around 11% year to date. Higher crude oil prices, demand from defense and oil marketing firms have contributed to the latest bout of weakness." He said, "Rupee was overvalued on the trade-weighted real effective exchange rate. We are not overly concerned about the rupee beyond 72 level. Robust FDI flows in e-commerce companies, healthy forex reserves may limit the downside of the rupee."

Federation of Indian Export Organisations regarding this situation said that exporters are facing uncertainty because of a constant depreciation of the domestic currency as they are not able to negotiate properly prices of goods in the global markets.

As reported by the Economic Times this record rupee depreciation against the dollar will affect imports, as it would be costlier. Although imports like oil can't be cut down which can negatively affect India's current account deficit. There will be an inflationary risk for the reason that imports are costlier when the currency depreciates. Costlier oil will lead to costlier vegetables and groceries since transportation costs rise. Weak rupee against the dollar also forces holidays and education in foreign countries more expensive. It would affect imported goods such as smartphones, computers, and cars which will be more expensive.

In the meantime, the benchmark BSE Sensex recovered over 100 points and NSE Nifty regained the 11,700-mark ahead of the release of key GDP data scheduled later in the day.