Exchange Rate in India in 2022
The Indian rupee (code: INR) is the official currency of India. The rupee is subdivided into 100 paise (singular: paisa), though as of 2019, coins of denomination of 1 rupee is the lowest value in use. The issuance of the currency is controlled by the Reserve Bank of India. Due to a perfect storm of global headwinds, the Indian rupee has been subject to significant selling pressure in recent weeks and is predicted that this pressure will continue to affect the currency in the months ahead. The Reserve Bank of India intervened to stop the decline, and it only recovered after it had already touched record lows by falling more than 80 to the dollar level twice in July.
INR and USD
The Indian rupee has recently plumbed record lows and at least twice exceeded the 80 rupees to one dollar mark in July. Only until the Reserve Bank of India (RBI) intervened to stop the decline did the rupee begin to recover. Since then, it has gained some ground, and in August, it was trading at about 79.06 to the dollar. In a written statement to parliament at the end of July, Finance Minister Nirmala Sitharaman justified the devaluation of the rupee as being caused by external factors. The ongoing war between Russia and Ukraine, rising crude oil prices, and tightening global financial conditions are just a few of the major global causes that have contributed to the Indian rupee's decline against the dollar.
India, the third-largest oil importer in the world, is particularly affected by the rising energy prices since it typically pays for its oil in dollars. The cost of purchasing oil increases as the rupee declines. Due to India's exposure to rising energy prices, the rupee has depreciated more than 5% against the dollar year-to-date. Since March, when Russia's invasion of Ukraine started, there has been a "significant spike" in Russian oil shipments to India, and New Delhi appears to be planning to purchase even more cheap oil from Moscow.
Generally, a weaker currency serves as a pressure release valve to restore external stability by raising the cost of imports and increasing the profitability of exports. The RBI is expected to slow the rate hikes in September compared to the 50-basis point increase in August. A weak rupee and a record-high trade deficit reduced anticipation of a dovish pivot even though inflation slowed.
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