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Monday, 14 May 2018

Indian rupee is losing the race against US dollar

Por Olivia Rosario Rodríguez

The Indian rupee strengthened 6.75 percent last year in front of American dollar, but in the last 15 months has continued a general negative tendency and reached its lower point the past week. On Thursday the Indian currency was negotiated 67.32 rupees for a dollar and economic analysts said it can weaken even more.

According to a survey made by the diary Economic Time in February, the rupee can go beyond the change of 70 rupees for an American dollar before year end. Some of the banks that predicted that it will even overcome that barrier are the Deutsche Bank, Bank of America, DBS Bank, Global IFA, Yes Bank and EdelweissNSE and FinancialServices.

The increase of oil prices in the global markets can be a reason for the descent of the rupee. The American petroleum ascended to more than 70 dollars the barrel for the first time since November 2014, because operators are getting ready to reimpose sanctions to Iran. In that scenario, India imports almost 80 percent of the petroleum that consumes and that something that affects the rupee. Also, the dollar is getting stronger.

A weak rupee in front of a stronger dollar makes imports more expensive, and some of it cannot decrease, like crude, the main import of India, that would also be more expensive. Most expensive petroleum means more expensive vegetables and groceries and higher prices of transport.

The weakened currency would also make education and vacations in foreign countries even more expensive for Indians. All industry and trade based on imports would suffer. The products that use imported components like computers, smartphones and automobiles would also become deal.

In addition, the inflation would hurry, and that’s something that could push Bank of the Reservation of India to increase the interest rates. On the other hand, with that increase of interest rates in United States, India once again is facing big quantities of capital exit, another thing that adds pressure to the national currency.

India, the third economy of Asia, overcame economic problems last year after three things happened: first, its growth decreased after a surprising demonetization; second, the introduction of a tax to the goods and services; and third, an irretrievable growing debt in the bank sector. However, the recent rise of oil prices threatens to increase the difficulties in the country.