New Delhi: The unexpected fall of rupee against the dollar is now threatening the country’s credit profile. It has also increased the foreign debt of the country. The rupee touched a low of 59.83 on Monday owing to the demand of the oil companies. But after the much needed selling of dollars by banks, rupee began to recover to close at the level of 59.68.

Rupee has declined by almost 8 percent since the first week of May. International credit rating agency Moody’s has reasoned that the sudden fall in rupee is because of the weakness in fundamentals of the Indian economy. Weak rupee has also dented the prospect of getting loans. However, the situation has not reached a point where a review in India’s credit ratings is required.

The stock market too has been witnessing a downward trend which has further dented the rupee. The dollar has been strengthened by demand from the oil companies. With indication of recovery in the American economy, the Foreign Institutional Investors (FIIs) are also constantly withdrawing their investments from India. FIIs have pulled out USD 5 billion from Indian markets so far.

On the instructions from the RBI, some PSU banks sold dollars on Monday which resulted in rescuing rupee from psychological level of 60. According to Merrill Lynch, the RBI may sell another USD 30 billion to arrest rupee fall. However, the CEO of India Forex Advisors Abhishek Goenka says that rupee is again bottoming out against dollar. FII pullout from the share market is also not helping the cause.

Weak rupee will also affect imports in India. The oil import in India will put pressure on the Indian economy. The current account deficit is close to its dangerous level. International agencies have also started to forecast further fall in rupee. International broking firm Standard Chartered has estimated the value of rupee to decrease from 53 to 60.5 in the current year.


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