Record decline in the value of the Indian rupee against the dollar

The exchange rate of the Indian currency fell to more than 80 rupees to the dollar, for the first time on Tuesday, at a time when the dollar strengthened its position and increased the flow of foreign capital abroad.

Bloomberg data showed that the rupee hit 80,0600 against the dollar shortly after the start of trading.

The high level of inflation and interest rates in the United States, coupled with fears of an imminent economic recession in the largest economy in the world, led to the rise in the price of the dollar in recent weeks at a time when investors are trying to avoid risks.

The tightening of US monetary policy has exacerbated capital outflows from emerging markets such as India, where foreign investors withdrew a net $30.8 billion in debt and equity this year.

Data published last week showed that consumer price inflation in the United States recorded a new level in June, the highest in four decades, exceeding market estimates and reinforcing expectations that the Federal Reserve will raise interest rates significantly next week.

In a written statement to Parliament on Monday, India's Finance Minister Nirmala Sitharaman attributed the rupee's massive decline to external causes.

And she stated that "international factors such as the Russian-Ukrainian conflict, high crude prices and tightening global financial conditions are the main reasons for the decline of the Indian rupee against the US dollar."

She added, however, that the Indian currency improved against the British pound, the Japanese yen and the euro during 2022.

However, the rise in crude prices led to the deterioration of the trade balance in a country that imports 80 percent of its oil needs.

India's merchandise trade deficit widened to a record $26.18 billion in June, official data revealed last week, mainly due to higher import costs for crude and coal.

In its monthly economic review, the Ministry of Finance said that rising import costs would exacerbate the current account deficit and cause the rupee to fall further.

Inflation in consumer prices in India, the sixth largest economy in the world, fell slightly to 7.01 percent in June after hitting an eight-year high in April of 7.79 percent.

But the price hike remained above the 2 to 6 percent target set by the central bank, despite raising interest rates in May and June.

Also, the central bank sold more than $34 billion of its foreign exchange reserves in hopes of maintaining the stability of the rupee.

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