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The <keyword id="6355302" type="General" weightage="20" keywordseo="rupee" source="Orion">rupee</keyword> fell 27 paise to close at 82.05 (provisional) against the US currency on Tuesday, weighed down by a strong greenback against major rivals overseas and a muted trend in domestic equities. At the interbank foreign exchange, the domestic unit opened at 81.84 against the dollar and slipped below the 82 levels to close at 82.05 (provisional), down 27 paise from its previous close. During the day, the rupee witnessed a high of 81.83 and a low of 82.15 against the greenback. On Monday, the rupee settled at 81.78 against the dollar. The rupee depreciated and is at its lowest level in two and half weeks on the positive US Dollar index. However, soft crude oil prices cushioned the downside, said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas. The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.10 per cent to 101.47. "US Dollar gained on risk aversion in global markets and as the Federal Reserve's Senior Loan Officer Opinion Survey shows banks continued to tighten credit conditions for business and households, but it was better than expected," Choudhary added. Brent crude futures, the global oil benchmark, declined 0.88 per cent to <keyword id="54123" type="General" weightage="20" keywordseo="usd" source="Orion">USD</keyword> 76.33 per barrel. "We expect the rupee to trade with a negative bias on the strong Dollar amid safe haven appeal on the back of risk aversion in global markets and worries over a global economic slowdown. "However, softening crude oil prices at higher levels and FII inflows may support the rupee at lower levels. Investors may remain cautious ahead of inflation data from India and the US later this week. We expect USD/INR spot to trade in between 81.60 to 82.75 in the near term," Choudhary added. On the domestic equity market front, the 30-share BSE Sensex closed 2.92 points lower at 61,761.33. The broader NSE Nifty advanced 1.55 points to 18,265.95. Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Monday as they purchased shares worth Rs 2,123.76 crore, according to exchange data. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/fpis-pump-9677-crore-into-financial-services-and-auto-stocks-in-april/articleshow/100100496.cms">FPIs pump ₹9,677 crore into financial services and auto stocks in April</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/sensex-closes-at-61761-on-fag-end-volatility-after-crossing-62000-during-the-day/articleshow/100101148.cms">Sensex closes at 61,761 on fag-end volatility after crossing 62,000 during the day</a>

Rupee weighed down strong greenback, falls 27 paise to close at 82.05/USD

The <keyword id="6355302" type="General" weightage="20" keywordseo="rupee" source="Orion">rupee</keyword> gained 57 paise to close at 81.78 (provisional) against the US dollar on Tuesday, the biggest single-day gain since November. Forex traders said the rupee was the best performer among Asian currencies and now has the support of 81.70. At the interbank foreign exchange market, the local unit opened at 82.20 and touched an intra-day high of 81.72 and a low of 82.26 against the greenback. It finally ended at 81.78 (provisional), registering a rise of 57 paise over its previous close. On Monday, the rupee settled at 82.35 against the US dollar. The dollar index, which gauges the greenback's strength against a basket of six currencies, advanced 0.12 per cent to 103.12. The rupee became the best performer among the Asian currencies following stop order triggers and inflows from bond selling, said Dilip Parmar, Research Analyst, <keyword id="11837714" type="DOMAIN" weightage="20" keywordseo="hdfc" botkeyword="" source="ET" sourcekeytype="COMPANY" meta.keywordsubtype="EQ" meta.aliasname="hdfc" meta.entityname="Housing Development Finance Corporation Ltd." meta.entityid="13640" meta.seoname="housing-development-finance-corporation-ltd">HDFC</keyword> Securities. "The local unit witnessed the biggest single-day gains after November 11 and broke the psychological level of 82 as the traders rushed to cover the positions," Parmar said. Parmar further noted that Spot USD/INR now has the support of 81.70, "the 50 per cent Fibonacci retracement adjoining the November 14 low of 80.51 and the January 03 high of 82.94. The near-term view remains bearish for the pair and a level below 81.70 will pave way for 81.45 while on the higher side 82.10 acts as resistance". On the domestic equity market front, the 30-share BSE Sensex declined 631.83 points or 1.04 per cent to end at 60,115.48, while the broader NSE Nifty fell 187.05 points or 1.03 per cent to 17,914.15. Global oil benchmark Brent crude futures rose 0.13 per cent to <keyword id="54123" type="General" weightage="20" keywordseo="usd" source="Orion">USD</keyword> 79.75 per barrel. Foreign Institutional Investors (FIIs) were net sellers in the capital market on Monday as they offloaded shares worth Rs 203.13 crore, according to exchange data. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/net-inflows-in-mf-schemes-up-three-times-at-7303-crore-in-december/articleshow/96881163.cms">Investors continue to SIP on equities: Net Inflows in MF schemes up three times at ₹7,303 crore in December</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/tcs-tata-motors-paytm-among-stocks-in-focus-on-tuesday/articleshow/96870156.cms">Sensex sheds 632 points, Nifty50 falls 187 points as PSU bank, financial services and IT stocks drag</a>

Rupee gains 57 paise to close at 81.78 against US dollar

<ul><li>In initial trading, the <keyword id="6355302" type="General" weightage="20" keywordseo="Rupee" source="Orion">rupee</keyword> also touched ₹81.51 against the American currency.</li><li>The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.35 percent to 110.81.</li><li>Global oil benchmark Brent crude futures surged 0.13 per cent to $ 93.49 per barrel.</li></ul> The rupee depreciated 4 paise to 81.66 against the US dollar in early trade on Thursday amid high volatility as rising crude oil prices weighed on the local unit. At the interbank foreign exchange, the rupee opened on a strong note at ₹81.52 against the greenback, then pared the gains and fell to ₹81.66, registering a fall of 4 paise over its previous closing. In initial trading, the rupee also touched ₹81.51 against the American currency. On Tuesday, the rupee appreciated by 20 paise to end at ₹81.62 against the US dollar. The forex market was closed on Wednesday on account of Dussehra. According to Sriram Iyer, Senior Research Analyst at <keyword id="197560" type="General" weightage="80" keywordseo="reliance-securities" source="Orion">Reliance Securities</keyword>, the rupee opened stronger tracking a fall in the dollar over the past two sessions. Moreover, Asian and emerging market peers were also stronger this Thursday morning and lent support. However, stronger crude oil prices, hawkish rhetoric from Fed officials and JP Morgan's decision to hold off the inclusion of Indian bonds into its global index weighed on the local unit, Iyer added. The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.35 per cent to 110.81. Global oil benchmark Brent crude futures surged 0.13 % to $93.49 per barrel. On the domestic equity market front, the 30-share <keyword id="53232" type="General" weightage="80" keywordseo="bse-sensex" source="Orion">BSE Sensex</keyword> was trading 357.3 points or 0.62 % higher at 58,422.77, while the broader NSE Nifty advanced 109.25 points or 0.63 per cent to 17,383.55. Foreign institutional investors were net buyers in the capital market on Tuesday as they purchased shares worth ₹1,344.63 crore, as per exchange data. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/news/big-emitters-not-acknowledging-climate-risks-carbon-tracker/articleshow/94672583.cms">Big emitters not acknowledging climate risks: Carbon Tracker</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/sensex-is-up-334-points-nifty-by-91-points-tracking-gains-from-asian-markets/articleshow/94672606.cms">Sensex is up 334 points, Nifty by 91 points tracking gains from Asian markets</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/india-incs-foreign-commercial-borrowings-rise-by-4-6-in-august/articleshow/94664946.cms">India Inc's foreign commercial borrowings rise by 4.6% in August</a>

Rupee falls 4 paise to 81.66 against US dollar in early trade

The rupee on Tuesday recovered 13 paise to close at 71.85 (provisional) against the US dollar amid easing crude oil prices and weakening of the American currency in the overseas market. Forex traders said while weak dollar and easing crude oil prices supported the rupee, losses in domestic stocks and foreign fund outflows weighed on the local unit restricting its upmove. At the interbank foreign exchange market, the local currency opened on a positive note at 71.84. During the day, it saw a high of 71.78 and a low of 71.90. The Indian currency settled higher by 13 paise at 71.85, cutting short its three-day losing run, according to provisional market data. The domestic unit had settled at 71.98 against the American currency on Monday. "Rupee started the day strong on back of firm opening of stocks, selling by exporters and a weak dollar," said Jateen Trivedi, Senior Research Analyst (Commodity &amp; Currency) at LKP Securities.

Rupee up 13 paise at 71.85 against USD on easing crude prices, weak dollar

The massive sell-off that has gripped <keyword id="6359891" type="COMPANY" weightage="60" keywordseo="emerging-markets">emerging markets</keyword> over the past several weeks continues with a vengeance this week.
The Turkish lira, the Brazilian real, the Mexican peso, and several other emerging-market currencies are down big against the dollar.
Far and away the biggest loser, though, is the Indian <keyword id="6355302" type="ORGANIZATION" weightage="60" keywordseo="Rupee">rupee</keyword>: the U.S. dollar is up 2.9% against the rupee today.
It's not just today that the rupee is underperforming vis-a-vis its emerging-market peers, either. The dollar-rupee exchange rate is currently the highest percentage above its 20-day moving average of any major currency pair.
India is desperately trying to stave off a balance-of-payments crisis that is causing the currency to tank, but so far has been unsuccessful, judging by the reaction in currency markets.
Exacerbating the rupee crisis today is the fact that the lower house parliament voted to pass a a<a href="http://www.businessinsider.com/nomura-on-the-indian-food-bill-2013-8">huge food subsidy bill that will likely expand the deficit, and increase inflation</a>.
The chart below shows the big losses in the rupee against the dollar year-to-date.
<div class="image-container click-to-enlarge"><div class="image"><a title_source="Business Insider/Matthew Boesler, data from Bloomberg" title_caption="" class="zoomin" href="http://static6.businessinsider.com/image/521c9a41ecad0422552ad403-960/dollar-rupee-exchange-rate.png"></a>Business Insider/Matthew Boesler, data from Bloomberg</div></div>

CHART OF THE DAY: The Indian Rupee Is Getting Absolutely Brutalized

Prospects of a Modi election victory have induced a dollar flood into Indian bonds and <keyword id="45369" type="CITY" weightage="40" keywordseo="equities">equities</keyword>. The rupee has strengthened to below Rs 60 per dollar. 
 
If the strong rupee was caused by an export boom, everyone would be delighted. In fact, it has been caused by hot money plunging into the speculative froth of a Modi victory. This sort of strong rupee torpedoes India’s export prospects without providing any sustainable gains. 
 Some investment banks see the rupee strengthening further to Rs 58 per dollar. Adam Gilmour of Citigroup says it could strengthen to Rs 40-45 per dollar if Modi wins handsomely. But this would be disastrous for India’s competitiveness and balance of payments. The RBI must send a clear signal to <keyword id="6358355" type="ORGANIZATION" weightage="40" keywordseo="forex">forex</keyword> markets that it will keep the rupee competitive. It must mop up excessive inflows. The consequent increase in rupee money supply should be sterilised by equivalent RBI sales of gilts, checking any inflationary impact. 
 
Many ordinary Indians feel good about a strong rupee. But equating national prestige with a strong rupee is wrong. What matters is that India’s exports are competitive, and current account deficit under control. If this co-exists with a strong rupee, fine. But if this requires a weaker rupee, that’s fine too. The exchange rate is a means to an end, not an end in itself. 
 Last year, Prachi Mishra, <keyword id="192731" type="PERSON" weightage="40" keywordseo="Rohini-Malkani">Rohini Malkani</keyword> and others in the <keyword id="47209" type="ORGANIZATION" weightage="40" keywordseo="Finance-Ministry">finance ministry</keyword> calculated that a reasonable exchange rate might be Rs 58-60 to the dollar. All such calculations are iffy, but many foreign analysts had a similar view. However, the continuing <keyword id="22195" type="COMPANY" weightage="40" keywordseo="Inflation">inflation</keyword> differential between India and the world means that the same model will indicate a reasonable range of Rs 60-62 per dollar today. Inflation is falling but remains well above rates abroad, so a competitive exchange rate might be Rs 63-65 per dollar by the end of 2014. 
 
75% Gilt-y 
 
The composition of the recent dollar inflow is dismaying. Of the $8-billion inflow since January, no less than $6 billion is into gilts. Indian interest rates are sky-high by global standards, with short-term gilts yielding 8.5%. Last year, rupee depreciation made the high rupee yield illusory. 
 But today, foreigners get a high coupon plus currency appreciation, giving a fabulous total return of maybe 10%. No wonder they are flooding in. It’s wrong to <keyword id="25455" type="ORGANIZATION" weightage="40" keywordseo="finance">finance</keyword> India’s current account deficit by borrowing short term at an effective dollar rate of 10%. The RBI must discourage debt inflows of less than two years’ duration. The <keyword id="37018" type="UNKNOWN" weightage="40" keywordseo="interest-rate">interest rate</keyword> for two-year gilts is just a fraction more than for three-month treasuries, but carries a clear exchange rate risk — the rupee will very probably depreciate in two years. Three-month inflows constitute risky hot money, which will flood out if the election results don’t meet expectations. Two-year inflows will be much less volatile. 
 
History has repeatedly shown India’s vulnerability to sudden stops of forex inflows. Such sudden stops can be triggered by global events even if there is no disaster in India itself. The best remedy is continuously rising productivity, making exports more competitive and imports less competitive, ending any significant current account deficit. 
 In less ideal conditions, safety can be improved in two ways. One, limit the current account deficit by letting the rupee depreciate when exports turn uncompetitive. Two, encourage relatively stable dollar inflows, and discourage relatively unstable ones. There are four sorts of forex inflows. The most stable, desirable sort is foreign direct investment (<keyword id="44528" type="ORGANIZATION" weightage="40" keywordseo="FDI">FDI</keyword>). Foreign-owned factories and power stations cannot exit in a panic. 
 
No Running Away 
 The second most stable inflow is into equities. If foreign investors try to exit en masse in a panic, stock prices and the exchange rate plummet. Equity investors can exit only at a very steep loss, so many stay put. This was demonstrated in the Asian Financial Crisis and Great Recession. The third most stable — or second most unstable — inflow is into medium-or long-term rupee bonds. Here too, any mass exit will depress the price and exchange rate too. But bonds are far less volatile than <keyword id="6354298" type="ORGANIZATION" weightage="40" keywordseo="stocks">stocks</keyword>, and so carry a much lower exit penalty. 
 
Red-Hot Greenbacks 
 
The fourth, worst sort of inflow is dollar-denominated debt, which on maturity is repaid in full without any exit penalty. Long-term dollar debt takes time to mature, and is not so hot. But short-term dollar debt matures very quickly and is the hottest-ofhot flows. Rupee-denominated short term debt is not quite so bad, since it carries some currency risks (which are, however, limited because of the short maturity). 
 
These facts should guide the strategy of the next government and of the RBI. Priority should be given to raising productivity and, thus, reducing the current account deficit. As for inflows, FDI is the best. Inflows into equities is also desirable. Dollardenominated debt should not be encouraged. And foreign investment in short-term debt, whether in rupees or dollars, must be strongly discouraged. Hot money must not be allowed to make exports uncompetitive.

Short-Term Capital Inflows Boosting The Rupee Will Render Exports Uncompetitive

<ul><li><keyword id="61430" type="PERSON" weightage="20" keywordseo="fuel-prices">Fuel prices</keyword> in India reached an all-time high again today partly owing to the continued depreciation of the rupee. </li><li>Rather than cutting taxes on fuel, the government is instead trying to stem the slide in rupee by selling rupee-denominated bonds to foreigners and NRIs. </li><li>A cut in fuel duties runs the risk of increasing the <keyword id="6365485" type="DEFINITION" weightage="20" keywordseo="Fiscal-Deficit">fiscal deficit</keyword> further, which will, in turn, lead to the rupee’s depreciation. </li></ul>Fuel prices in India reached an all-time high again today as <keyword id="6367091" type="UNKNOWN" weightage="20" keywordseo="petrol">petrol</keyword> was being sold for ₹80.87 a litre in Delhi and ₹88.26 a litre in Mumbai while <keyword id="6356109" type="UNKNOWN" weightage="20" keywordseo="diesel">diesel</keyword> hit ₹72.97 a litre in Delhi and ₹77.47 a litre in Mumbai. The backlash has been resounding. In addition to political mudslinging, The Congress and other Opposition parties staged a “Bharat Bandh” or series of peaceful protests around India. Some schools and government offices were shut. Truck drivers also staged demonstrations. The central government, led by the BJP, has ruled out a cut in duties on fuel. In addition to a customs duty of 2.5%, the excise duty on fuel is currently ₹19.48 per litre while it is ₹15.33 per litre for diesel. The rates have been raised nine times and decreased only once since the BJP government came to power in May 2014. The rising price of fuel is mainly due to the fact that India imports most of its oil and the rupee is currently at an all-time low against the dollar. Rather than cutting taxes on fuel, the government is instead focusing on trying to stem the slide in rupee by selling rupee-denominated bonds to foreigners and NRIs, which will make the rupee appreciate. Why is the government refusing to cut fuel prices? While protests from the Opposition indicate that the central government has a choice in the matter of fuel duties, which it does in principle, the actual reality is that it is lodged between a rock and a hard place. A affects B which affects C which affects A The government is currently dealing with a large, and growing, fiscal deficit - which occurs when its expenses outweigh its revenues. It is able to keep this deficit in check (within the range of 3% of GDP) partly owing to the duties it imposes on fuel and fuel products. However, if the government were to cut fuel duties and risk a widening of its fiscal deficit, the rate of yield on its rupee-denominated bonds would be higher in light of the increased risk associated with them. This, in turn, would make them less attractive to investors, potentially leading to further depreciation of the rupee. Hence, in order to cut fuel prices, the government would find itself in a position where the rupee was worse off than it was before, which would counteract the effects of the initial reduction in fuel duties. However, this does not mean that the government will never be able to cut taxes on fuel. Once it is able to increase revenues from duties and taxes on non-oil products, which will follow heightened GST compliance and the continued crackdown on tax evasion, then its fiscal deficit will be able to bear the brunt of a reduction in fuel duties. Countries which feature a high rate of tax compliance usually have much lower duties on fuel, relative to India. Rates can also be cut at the state level, wherein <keyword id="463828" type="PERSON" weightage="20" keywordseo="value-added-tax">value-added tax</keyword> (VAT) is imposed on fuel products. Once again, though, this depends on the state’s financial situation. Some states like Andhra Pradesh and Rajasthan, which are in better financial health, have been able to cut the VAT rate on fuel products. However, for most states like Maharashtra and Bihar, which run a deficit, a cut would be hard to stomach. Banking on RBI intervention The Indian government has asked the RBI to intervene in capital markets and prevent the rupee from depreciating further. The central bank has been withdrawing funds from its foreign exchange reserves to prop up the rupee and prevent volatility in recent months, however this hasn’t proved an adequate solution. It will likely raise interest rates for the third successive time to keep inflation and check and to prevent capital outflows.

Here’s why the Indian government is not being able to cut fuel prices

\<ul class="summary-list"><li>Russia's former finance minister blamed Moscow's accumulation of rupees for bringing the ruble down.</li><li>Kremlin authorities have acknowledged the Russia has accumulated billions of rupees sitting in Indian banks.</li></ul>Mikhail Zadornov, Russia's former minister of finance, attributed the ruble's recent crash to the Kremlin's stockpile of rupees that are stuck in India.In an <a href="https://www.rbc.ru/opinions/finances/29/08/2023/64ec75029a794735468d3c7c" target="_blank" rel="noopener">opinion piece for RBC</a>, a local outlet, the economist called for the Russian Central Bank to intervene in the exchange rate markets, citing that the ruble's levels would not organically reorient themselves under today's environment.In his view, the ruble's current 95-per-dollar level is in part the result of Russia's inability to convert rupees it earned via exports into its own currency, leaving the rupees stranded.Energy trade between the countries blossomed since Russia was restricted by Western sanctions, but Moscow soon found out that the rupees used in the trade have little use in most global markets."We have nothing to buy in India, but we cannot return these rupees, because the rupee is an inconvertible currency," Zadornov wrote. He estimated that Russia has sent $30 billion worth of oil-related products to India, and imported $6 billion-$7 billion worth of products. The economist also cited other factors, such as stimulus given out to Russians. When this happens, demand for imports rises, therefore pushing the ruble down. He said the ruble could return to 85 against the dollar, if Russia abandons stimulus and the central bank tightens monetary policy. Among other ideas, he added that future export agreements should be met with repatriation requirements.Zadornov's writings caught the attention of the Kremlin. It's <a href="https://tass.com/economy/1666967" target="_blank" rel="noopener">state-run Tass agency</a> said Russia's Energy Ministry denied he statements that stranded rupees weakened the ruble.Moscow previously has acknowledged that <a href="https://markets.businessinsider.com/news/currencies/russia-india-ruble-rupee-sanctions-trade-imbalance-yuan-weapons-deficit-2023-5">Russia has accumulated billions of rupees</a> that are sitting in Indian banks.Russia prefers to be paid in Chinese yuan, which has become the <a href="https://markets.businessinsider.com/news/currencies/dollar-vs-yuan-chinese-currency-usd-russia-moscow-beijing-sanctions-2023-4?utm_medium=ingest&amp;utm_source=markets" rel="">most-used foreign currency</a> in Russia. Meanwhile, Moscow has reportedly been hesitant about using the rupee due to exchange-rate volatility.<a href="https://markets.businessinsider.com/news/currencies/russia-dollar-currencies-india-yuan-rupee-china-trade-sanctions-moscow-2023-5?utm_medium=ingest&amp;utm_source=markets" rel="">Russia and India previously suspended negotiations over using rupees</a> for trade between the two countries. Russia and India remain deadlocked in a currency dispute that has also <a href="https://markets.businessinsider.com/news/currencies/russia-weapons-sales-india-ruble-rupee-euro-dirham-s400-dedollarization-2023-4?utm_medium=ingest&amp;utm_source=markets" rel="">frozen weapons sales</a> between the two countries.

Former Kremlin official blames the ruble's crash on Russia's stockpile of rupees that's stranded in India

<ul><li>The <keyword id="6355302" type="UNKNOWN" weightage="20" keywordseo="Rupee">rupee</keyword> closed a record-low of 70.74 to the US dollar on 30 August. </li><li>While exporters rejoice, importers will find themselves shelling out more rupees for the same quantity of goods. </li><li>Hence, in anticipation of the rupee’s continued weakness, importers are setting prices for two to three months through futures contracts instead of fortnightly deals. </li></ul>If you’ve been reading the news, you’ll know that the rupee is on a free-fall. During trading hours today, the rupee even crossed <a href="https://www.livemint.com/Money/Ymv0RnYYt6wgQbYz6ZRiFM/Rupee-fall-continues-hits-71-against-US-dollar-for-first-ti.html">the 71 mark</a> after hitting a record-low of 70.74 at close on 30 August. This brings the rupee’s decline in the year so far to 10%, making it one of the worst-performing currencies in Asia. While exporters and people who received remittances are no doubt, rejoicing, businesses that buy products from abroad to sell here find themselves worse off as a falling exchange rate only serves to increase their costs as it takes more rupees to buy an equivalent amount of dollars. For example, the Indian government, which imports oil from abroad, is expected to see its crude oil bill increase by over $25 billion this year as a result of the rupee’s <keyword id="6365592" type="DEFINITION" weightage="20" keywordseo="Depreciation">depreciation</keyword>. How then, are importers securing their positions in order to minimise their losses? The answer is futures contracts. In anticipation of the rupee’s continued weakness, importers are opting for two or three-month long <keyword id="144660" type="PERSON" weightage="20" keywordseo="Futures-contract">futures contract</keyword>s instead of biweekly contracts to minimise the amount they have to pay out. A futures contract allows companies to settle on a price for a few months, thereby preventing short-term volatility. They can be customised to most products and commodities. However, while it provides some form of insurance in the short-term, it is definitely a risk. If the rupee were to strengthen considerably in the course of the next month, perhaps by government intervention, then the companies would end up paying more than what the exchange rate dictates they should. So, in essence, it is a slight gamble. In addition, if a lot of importers opt for these contracts, they have to a premium on them - which is called a forward premium. The bulk of companies that are opting for these contracts are from the shipping, coal, petroleum, electronics and machinery sectors. Interestingly, there is a silver lining to the rupee’s freefall. It will help correct <keyword id="3658" type="LOCATION" weightage="20" keywordseo="India">India</keyword>’s $16.6 billion <keyword id="44844" type="ORGANIZATION" weightage="20" keywordseo="Trade">trade</keyword> deficit, which is a result of imports exceeding exports. With the rupee declining, the cumulative value of exports in rupee terms will be significantly higher while imports will likely reduce in rupee terms as well as in volume as importers opt for smaller orders.

Here’s what Indian importers are doing to hedge their positions as the rupee plummets

Mumbai, Apr 17 () The Indian rupee on Friday settled 48 paise higher at 76.39 against the US dollar, rebounding from an all-time low hit a day earlier, buoyed by RBI measures to prop up the economy reeling under the Covid-19 impact. A strong rally in domestic equities also helped in improving forex market sentiment. At the interbank foreign exchange, the rupee opened at 76.59 and then gained further ground to touch a high of 76.35 against the US dollar. The domestic unit finally settled for the day at 76.39 against the US dollar, registering a rise of 48 paise over its previous close. On weekly basis, the Indian unit lost 12 paise or 0.15 per cent against the USD. On Thursday, the rupee had settled at an all-time low of 76.87 against the US dollar. In a much anticipated move, the RBI announced a slew of measures to infuse liquidity in the financial system including a cut in the reverse repo rate, Rs 50,000-crore targeted long-term repo operations (TLTRO) and refinancing facilities for Nabard, Sidbi and NHB. Forex traders said these measures announced by Reserve Bank Governor Shaktikanta Das would provide the much needed liquidity and ease the financial stress caused by the pandemic. The central bank reduced the reverse repo rate - the rate at which banks park their fund with the central bank - by 25 basis points to 3.75 per cent. This will encourage banks to lend to the productive sectors of the economy. With regard to other measures, Das said the RBI will begin with giving an additional Rs 50,000 crore through targeted long-term repo operation (TLTRO) to be undertaken in tranches. Besides, he announced a re-financing window of Rs 50,000 crore for financial institutions like Nabard, National Housing Bank and Sidbi. Jateen Trivedi, Senior Research Analyst (Commodity &amp; Currency) at LKP Securities, said, "Rupee traded stronger today on back of Reserve bank of India announcing liquidity measures to boost growth amid slowdown due to Covid-19 lockdown". The number of cases around the world linked to the new coronavirus has touched nearly 22 lakh. In India, over 13,300 coronavirus cases have been reported so far. On the equity market front, the BSE Sensex closed 3.22 per cent or 986 points higher at 31,589, while the 50-share Nifty advanced 3.05 per cent or 274 points to close at 9,267. Nearly Rs 3 lakh crore were added to the market capitalization of BSE-listed companies. Brent crude futures, the global oil benchmark, rose 0.29 per cent to USD 27.90 per barrel. Meanwhile, the dollar index, which gauges the greenback's strength against the basket of six currencies was trading 0.05 per cent higher at 100.07. The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 76.7408 and for rupee/euro at 83.6541. The reference rate for rupee/British pound was fixed at 95.9853 and for rupee/100 Japanese yen at 71.22. DRR MKJ

Rupee rebounds 48 paise against USD on RBI booster

Earlier this week, the Indian <keyword id="6355302" type="General" weightage="100" keywordseo="rupee" source="Orion">rupee</keyword> nosedived 51 paise, <a href="https://www.businessinsider.in/finance/news/rupee-hits-all-time-low-of-77-42-against-us-dollar/articleshow/91439581.cms">hitting an all-time low</a> of ₹77.41 against the US dollar. <div type="image" title="Rupee hit a lifetime low of 77.41 earlier this week" msid="91525914" hostid="261" caption="&amp;lt;p&amp;gt;Rupee hit a lifetime low of 77.41 earlier this week&amp;lt;/p&amp;gt;"></div> Earlier last week, the Indian rupee had appreciated eight paise after India’s central bank, the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword>, <a href="https://www.businessinsider.in/finance/banks/news/rbi-hikes-repo-rate-by-40-basis-points-to-4-4-as-it-seeks-to-reign-in-inflation/articleshow/91311941.cms">increased interest rates</a> by 40 basis points on May 04, only to tumble further below this week. 100 basis points make one percent. The rupee has been staggering since the beginning of the year. <div type="image" title="Rupee depreciation in last one month" msid="91525962" hostid="261" caption="&amp;lt;p&amp;gt;Rupee depreciation in last one month&amp;lt;/p&amp;gt;"></div> This depreciating rupee, which is a fall in the value of a currency in terms of its exchange rate versus other currencies, is likely to have a direct impact on your daily expenditure. Imports now more expensive, while exports are cheaper With a small dip in the <keyword id="50739" type="General" weightage="20" keywordseo="indian-currency" source="Orion">Indian currency</keyword>, the Indian government has to pay a little extra for the same goods it was importing earlier. So, importing items get more expensive. Oil imports will get costlier, which has a direct impact on prices of many other things – anything that needs to be transported will (if it hasn’t, already) now see an increase in its prices. India currently imports <a href="https://www.businessinsider.in/finance/news/crude-oil-surges-significantly-to-109-per-barrel-as-countries-look-for-options-other-than-russia/articleshow/89936843.cms">85% of its oil demand </a>and the rise in crude oil prices directly increases import bill and expenses. Your investment portfolio is likely to be affected If foreign investors pull out of Indian equities, Indian currency depreciates, leading to a sharp decline in equity markets. Foreign investors have already <a href="https://www.businessinsider.in/stock-market/news/foreign-investors-have-pulled-out-1-5-lakh-crore-from-the-indian-markets-in-2022-so-far-heres-why/articleshow/91485411.cms">pulled out over ₹6,400 crore</a> from the Indian equity markets in the first four trading sessions of May when the Reserve Bank of India (RBI) and <a href="https://www.theguardian.com/business/federal-reserve">US Federal Reserve</a> raised interest rates. Given the headwinds in terms of elevated crude oil prices, inflation, and monetary tightening (also known as Quantitative Tightening), market volatility is expected to remain high as foreign investors could continue to withdraw funds. Foreign education could get more expensive If you are planning to study abroad, you might have to restructure your budget. You will have to shell out more rupees for every dollar you spend. Simply put, you will have to spend over 21% more in terms of rupee to buy the same number of dollars. If you budgeted ₹20 lakh for your education abroad, you will now have to increase it to ₹24.2 lakh. <div type="image" title="Foreign education will get more expensive" msid="91525979" hostid="261" caption="&amp;lt;p&amp;gt;Foreign education will get more expensive&amp;lt;/p&amp;gt;"></div> International travel now more expensive During summer, the travel sentiment is high among consumers. As the rupee loses value against the US dollar, your plans to travel abroad will burn a deeper hole in your pocket – like everything, paying for your purchases in foreign currency, moreso the US dollar, is now more expensive than ever before. A weaker rupee results in expensive imports, and contributes to inflation <a href="https://www.livemint.com/economy/indias-inflation-likely-accelerated-to-18-month-high-in-april-poll-11652181052993.html">India's retail inflation</a> surged to an 18-month high in April, largely driven by rising fuel and food prices and staying well above the RBI's upper tolerance limit for a fourth consecutive month, a Reuters poll found. As the rupee weakens against the dollar and import prices hike, companies may not be able to absorb this increase in cost and may pass it on to consumers. Increase in your home loan EMIs and more To keep inflation in check, RBI resorts to increasing its interest rates. If the RBI expects that inflation will rise beyond its tolerance limit, it hikes the rate at which banks borrow money from the RBI, which is also known as the repo rate. When repo rate increases, the cost of borrowing for banks also increases, which is passed to their account holders by increasing the interest rate on loans and deposit rates. Some banks have already announced an increase in interest rates on home loans – HDFC has <a href="https://economictimes.indiatimes.com/wealth/borrow/hdfc-hikes-home-loan-interest-rates-this-is-how-much-your-emi-will-go-up-by/articleshow/91434723.cms">increased</a> its interest rates for retail home loans by 30 basis points, with the new rates now in the range of 7-7.45%. But what has caused the decline of the Indian rupee? The value of any currency depends on its demand in the market. If the demand increases, its value goes up, which is known as appreciation. And if the demand for a currency declines, its value depreciates. If more foreign investors invest in Indian businesses and projects, the demand for Indian currency goes up. To be able to invest in India, foreign companies have to first convert their currency into Indian rupees. This increase in demand for the rupee strengthens its value against the US dollar. Recently, more and more overseas investors have pulled out a big chunk of their money from the Indian market, consequently <a href="https://www.businessinsider.in/stock-market/news/the-stock-markets-are-going-through-a-short-term-correction-and-now-might-be-a-good-time-to-invest-in-valued-stocks-say-analysts/articleshow/91369077.cms">affecting market sentiment</a> and currency’s decline. <div type="image" title="Foreign investors have pulled out `1.5 lk cr in 2022 so far" msid="91526033" hostid="261" caption="&amp;lt;p&amp;gt;Foreign investors have pulled out `1.5 lk cr in 2022 so far&amp;lt;/p&amp;gt;"></div> The <a href="https://www.theguardian.com/business/federal-reserve">Federal Reserve</a> has raised interest rates for the first time since 2018, as the US central bank struggles with soaring inflation, the impact of the war in Ukraine and the COVID crisis. As interest rates soar, investors start pulling money out of riskier investments like equities, commodities and foreign markets. The annual <a href="https://www.businessinsider.in/policy/economy/news/inflation-slowed-in-april-for-the-first-time-in-8-months/articleshow/91496347.cms">inflation rate in the US</a> is now at 8.3%, which also affects market sentiment. Here’s an <a href="https://youtu.be/eADkfR1PUeU">explainer by Stocktwits India </a>on how the global inflation rate affects India and what the government is doing to combat it. Therefore, foreign investors are exiting their investments in India, and shoring up their investments in the relatively safer markets in the US. On the other hand, when Indian businesses and companies import foreign goods and products, such as crude oil, gold, consumer electronics, among other things, they convert their rupees into dollars, which is the global currency for international trades. If imports exceed exports, demand for the dollar goes up and the rupee weakens against it. Since India has been a <a href="https://www.indiatoday.in/news-analysis/story/current-account-surplus-india-net-exporter-explainer-1705281-2020-07-28">net importer</a>, we import more than we export, the rupee has gradually depreciated over time. <div type="image" title="Rupee vs Dollar in the last five years" msid="91526067" hostid="261" caption="&amp;lt;p&amp;gt;Rupee vs Dollar in the last five years&amp;lt;/p&amp;gt;"></div> As the upward trend of the graph shows, you had to shell out ₹64 in May 2017 for 1 US dollar. Today, you have to pay ₹77.26 in exchange for a dollar. To deal with this <keyword id="688216" type="General" weightage="20" keywordseo="Rupee-depreciation" source="Orion">rupee depreciation</keyword>, you can reevaluate your investment portfolio and consider companies that have a substantial amount of foreign exchange earnings such as in sectors like pharma, FMCG, and IT. Here's a short video <div type="image" title="Here&amp;#39;s what happens when the Rupee depreciates" msid="91526220" hostid="261" caption="&amp;lt;p&amp;gt;Here&amp;#39;s what happens when the Rupee depreciates&amp;lt;/p&amp;gt;"></div> Disclaimer: This is not investment advice, it is for informational purposes only.

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