Indian Rupee records fresh low on Tuesday, know-how RBI’s step would help rupee

The US dollar index, this morning was trading at 108.42, against 107.67 on Monday. Both the Indian Stock Markets BSE and NSE were trading at 0.3 percent and 0.4 percent lower, at 10:40 am IST, Tuesday.
Indian Rupee records fresh low on Tuesday, know-how RBI’s step would help rupee

The Indian rupee on Tuesday recorded a fresh low against the US Dollar as the greenback surged to a 20-year high globally and thus resulting in occurring of domestic losses. The Indian rupee on Tuesday morning was trading at as low as 79.61 against the US dollar.

The US dollar index, this morning was trading at 108.42, against 107.67 on Monday. Both the Indian Stock Markets BSE and NSE were trading at 0.3 percent and 0.4 percent lower, at 10:40 am IST, Tuesday.

Q

What’s bringing tension to Dollar?

A

The dollar due to the energy crisis in Europe and the slowing of the economic cycle across the globe due to the Russia-Ukraine conflict is thus witnessing aggressive rate hikes.

Earlier this year, the dollar gained an increase of 13 percent on its index. The rupee on the other hand has depreciated to a low of 6.6 percent in the same period.

RBI takes historic measures to reduce pressure on the Rupee
The Reserve Bank of India (RBI) on Monday took a historic decision and announced to settle international payments now with Indian Currency as well. As stated by RBI, this step would help in easing pressure on Indian Currency. Many experts, however, believe that it might result in an unfavorable near-term outlook for the domestic currency amid global tensions.

RBI while announcing this said, "in order to promote the growth of global trade with emphasis on exports from India and to support the increasing interest of the global trading community in INR, it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR."

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Possible benefits
With this decision of the Central bank, some of the most predictable benefits could be the ease of trade between India and Russia. Since the beginning, Russia has been facing a number of sanctions from European and other countries supporting Ukraine.

The new initiative would be insisting Indian exporters and importers to use special Rupee Vostro Accounts to settle their payments in rupees, and banks will require RBI's approval to use the settlement system.

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