Indian Rupee CRISIS: Indian currency under pressure set to crash to new lows | World | New
Skyrocketing oil prices and selling pressure caused the currency to fall above 80 to the dollar twice in July, only recovering after intervention by the Reserve Bank of India. Although the currency regained ground to 79.06 to the dollar on Thursday, analysts believe the currency will continue to decline.
Indian Finance Minister Nirmala Sitharaman blamed the Russian-Ukrainian conflict, soaring crude oil prices and dire global financial conditions for the slump in value.
She was quick to point out that although the rupee had deteriorated against the dollar, it had actually strengthened against the pound.
She said in July: “The British pound has weakened more than the Indian rupee against the US dollar and as a result, the Indian rupee has strengthened against the pound in 2022.”
However, analysts feared that this was not the end of the currency’s woes.
Goldman Sachs India’s chief economist, Santanu Sengupta, told CNBC the currency could fall as high as 80 to 81 rupees to the dollar over the next three to six months.
He said: “With global capital flows drying up in a cycle of Fed tightening, recession risks in the United States and India’s external balances becoming challenging, we are likely to see continued weakness in the economy. ‘INR in the future.’
Other analysts went even further, with Craig Chan, head of global currency strategy at Nomura, telling CNBC that the currency could trade with the dollar at 82 by the end of August.
He said: “Our last call was INR [rupee] risks breaking the $80-82 level and breaking above 82 by the end of August.”
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According to CNBC reports, for every $1 (£0.82) increase in the price of oil, India’s import bill increases by $2.1 billion (£1.73 billion).
June data shows that Indian imports of Russian oil reached nearly one million barrels per day.
India is vulnerable to rising oil prices and, like the West, as energy costs rise, so does inflation.
However, India’s inflation rate remained stable at around 7%, lower than that of the United States at 9.1% and the United Kingdom at 9.4%.