Indian Rupee Depreciating – 72.46 Is A New Record Set On Monday

The rupee being 71.74 on Friday set a new record on Monday with a fall of 72.45 against dollars. Is government responsible for this Depreciation or is the market forces which brings down the value of rupee against dollars. Depreciation in rupee refers to a decrease in the value of currency relative to other currencies which is due to market forces and not due to Indian government and bank policy actions .This is a good news for exporters, BPO, NRI’s and others who are paid in dollars because they get more rupees per dollar.

Market Forces are of two types demand and supply .These forces represent the aggregate influence of self-interested buyers and sellers on price and quantity of the goods and services offered in a market. In general excess demand causes prices and quantity of supply to rise, and excess supply causes them to fall. For inter nation currencies exchange rates are expressed as a comparison of two currencies and its always relative. If market forces determine the value of currency, that type of system is called Floating Rate System.

The rupee relative to the dollar weakened due to market events in recent past which were economic stimulus measures by U.S Federal Reserve, The European debt crisis (often also referred to as the Eurozone crisis), The rise in current account deficit or CAD

This Falling rupee has immensely increased the prices of commodities as India imports all commodities among which Oil and Gold is most prominent. This situation badly affects to the common man and the importers or those who visit the US for holidays as they need more local currency to get the same services . The fluctuations in currency market is what the Finance Minister and RBI governor should worry about.

This can be Controlled by making Government Bonds , Improving the Investment climate and also RBI has to take necessary measures to improve the condition of this falling rupee against dollars It has increased the maximum limit on foreign direct investment recently to try and reduce the trade deficit. They are hoping they will implement some policy changes in future which might help rupee to strengthen



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