Capital Market: Foreign investors invest in the Indian Capital markets in the form of Foreign Institutional Investments. When the markets are doing well, they put in dollars in the Indian Markets. During the past few months Indian markets have not been performing well. Thus, investors are withdrawing their capital. This leads to a depreciation of the rupee.
Inflation: If a country is going through a high inflationary phase, it leads to worsening of the overall economy. This leads to capital outflows, which leads to the depreciation of a currency.
Import Export Proportion: The imports of India are more than exports. India primarily imports high value products like petroleum products and crude oil and exports low value products like garments, textiles, leather products, handicrafts etc. This leads to a high demand of US Dollars. So, this results in dollar appreciation and rupee depreciation.
Demand for Foreign exchange: The demand for foreign exchange for the purpose of business, payments, tourism, etc. causes an increase in the exchange rate of the currency. For e.g.: – If a person goes to USA for higher studies, he needs dollars. Hence the demand for dollar rising.
Interest Rate: The demand for a currency is reliant on the interest rate differential between two countries. For. E.g. If in the India rate of interest is high, greater capital inflow will be there in India as investors get better returns. This results into rupee appreciation.
- The Indian rupee depreciated this week by 20 paisa compared with the previous week close.
- Last week Indian rupee closed at ₹69.15 with the aggregate gain of 07 paisa.
- This week on Thursday rupee closed at ₹69.36 with the gain of 25 paisa against the US dollar.
- Highest gain 25 paisa on Thursday and highest fall 27 paisa on Monday.