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Old September 23rd, 2008, 07:55 AM
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Question Why the rupee is falling against the dollar

Why the rupee is falling against the dollar


September 23, 2008

Text: Rediff Business Desk

These are extraordinary times. Analysts have described the events of the last few days as the worst financial crisis ever to have hit the world. Imprudent financial decisions, fed by greed and bad luck, have seen global financial markets collapse. The bankruptcy, sale, restructuring and merger of some of the world's largest financial institutions has caused cataclysmic disruptions in the international stocks and money markets.

In such a scenario, how could India have escaped unhurt? The global crises saw Indian stock markets crash, but as soon as the United States funneled in $700 billion into the American economy to revive dying markets, India too saw some stability. However, the forex market was a totally different ball game.

Even as the dollar strengthened, the Indian rupee began to fall alarmingly. The Indian currency has fallen to the lowest level in almost two years. At a low of 46.99 to the dollar this year that it hit on September 16, the rupee lost almost 18 per cent against the US currency!

To put things in perspective, the rupee was trading at about 39.40 to the dollar in January this year.

So why is the rupee falling against the dollar, when the global financial crisis should impact the United States the most?

There are several reasons. Analysts say these are the reasons for the fall of the rupee. . .

Link
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Old September 23rd, 2008, 09:23 AM
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Re: Why the rupee is falling against the dollar

Good for Indian IT industry and outsourcing...
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Old September 23rd, 2008, 09:37 AM
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Re: Why the rupee is falling against the dollar

Thanks for the post (and article), Echracha pai... I happened to look up the current rate couple of days back and was astounded... was wondering how why
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Old September 23rd, 2008, 09:55 AM
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Post Re: Why the rupee is falling against the dollar

Quote:
Originally Posted by 2gud View Post
Good for Indian IT industry and outsourcing...
Its not really good because a weaker rupee means less buying power. While rupee has weakened, the rate for 10 grams of gold has shot up.

I am no economist, nor an expert, but too low a rupee is not a good thing as far as I know.

HarHar, can you pontificate please.
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Old September 23rd, 2008, 10:12 AM
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Re: Why the rupee is falling against the dollar

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Originally Posted by echarcha View Post
Its not really good because a weaker rupee means less buying power.
very true... common man will find it tough to make ends meet with inflation and unemployment rate very high...
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Old September 23rd, 2008, 12:10 PM
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Re: Why the rupee is falling against the dollar

Quote:
Originally Posted by echarcha View Post
Why the rupee is falling against the dollar


September 23, 2008

Text: Rediff Business Desk

These are extraordinary times. Analysts have described the events of the last few days as the worst financial crisis ever to have hit the world. Imprudent financial decisions, fed by greed and bad luck, have seen global financial markets collapse. The bankruptcy, sale, restructuring and merger of some of the world's largest financial institutions has caused cataclysmic disruptions in the international stocks and money markets.

In such a scenario, how could India have escaped unhurt? The global crises saw Indian stock markets crash, but as soon as the United States funneled in $700 billion into the American economy to revive dying markets, India too saw some stability. However, the forex market was a totally different ball game.

Even as the dollar strengthened, the Indian rupee began to fall alarmingly. The Indian currency has fallen to the lowest level in almost two years. At a low of 46.99 to the dollar this year that it hit on September 16, the rupee lost almost 18 per cent against the US currency!

To put things in perspective, the rupee was trading at about 39.40 to the dollar in January this year.

So why is the rupee falling against the dollar, when the global financial crisis should impact the United States the most?

There are several reasons. Analysts say these are the reasons for the fall of the rupee. . .

Link
well, this is just a cycle. The last 10 months the Rupee/Euro was on a all time high as the dollar was sinking.
Now a year later the European economy is following the US and the euro is sinking.
The Rupee is also losin all the gains it made as the recession starts affecting globally.

Once the economy starts recovering or atleast the recession bottoms out globally, all these rates will go back to where they were. 41/42 seems the avg. price for the Rupee long term.

Then entire dollar based world economy is a topic tooo vast to bother starting here, but give it some thought and think about how it affects world oil, import export of goods, the outsourcing industry, trade deficits, tourism industries etc.
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