India’s rupee is approaching a psychologically important level in its history. Currency markets are betting more and more that the badly damaged unit could break through the Rs100-per-dollar mark if the war in the Middle East continues and oil prices stay high.
The rupee has already lost almost 6% of its value since the war between the US, Israel, and Iran started in late February. This week, it briefly stayed near the 97 level, even though the Reserve Bank of India was very involved. Forex traders and experts now think the real question is not if the rupee will cross 100, but when.
The sharp drop in value is due to a dangerous mix of rising crude oil prices, steady outflows of foreign funds, a growing current account deficit, and growing global uncertainty. Since India imports almost all of its crude oil, every rise in oil prices directly worsens the currency and inflation.
The falling value of the rupee is also a major concern for the millions of Indians living in the Gulf, especially in the UAE, where sending money back to their families is a major source of income. The UAE dirham, which is pegged to the US dollar at 3.67, is approaching Rs27 per dirham. It could soon hit Rs28 if the rupee breaks through the 100-per-dollar mark.
For NRIs in the Gulf, the drop in value means short-term gains on the money they send back home. Sending Dh5,000 every month now brings in a lot more rupees than it did at the beginning of the year. But experts say the benefits might only last a short time if the rupee’s fall causes inflation and makes it harder for Indian households to buy goods.
Also Read:
US EV Charging Infrastructure Struggles To Keep Pace Amid Fuel Price Surge
Palo Alto Investment In Coyote Valley Farmland Signals Growth In San Jose
