Ishan Bharadwaj

Article 1

Rupee slumps to an all time low of 56.67 against US Dollar

Indian rupee suffered its worst devaluation this week. The Indian rupee has depreciated by in excess of 20 per cent to close to 55-a-dollar mark currently from its near 44-level against the US currency at the end of May 2012 due to sustained dollar demand from banks and importers in view of the firm dollar sentiment fueled by Euro zone crisis. The weakening of Indian rupee against other foreign currencies, especially dollar, is not good news for the Indian government and also importers. A depreciating rupee may compound the macroeconomic problems as prices of imported goods will surge and worsen the current account deficit. India won't be able to take advantage even if commodity prices ease due to global slowdown. The value of various currencies moves relative to the sense of balance of trade between countries and the intensity of sovereign risk. India may be bare to a number of influences such as accessibility of raw materials, fuel and food and the level of international borrowing as well as withdrawing markets for their exports.

The ongoing rupee weakness is basically due to the European crisis coupled with crisis in domestic economy. Due to the up trending crisis in Europe, large banks, investors and financial institutions started selling euro and bought dollar, thus dollar appreciated against all major currencies including rupee. Domestic economy adds fuel to this crisis due to stagnant economic reforms and increasing current and fiscal