Reason for Rupee Fall Against Dollar

A weak rupee may be bad news for the country, but NRIs in these nations have a reason to rejoice. A remittance is a transfer of money by a foreign worker to his or her home country. India is the largest recipient of global remittances in the world, receiving $69 billion in 2012, according to a World Bank report. The money that expatriates send will have more value now because of a depreciating rupee.

Dollar trading at 3 year High

US Dollar at 3-Year High   USD has touched its 3 year High at 84.3, US stock market are at life highs,Strength in USD indicated recovery in US economy, We have seen a slew of data indicating the same. Housing Market is recovering, Job situation is improving which make market participants believe the US Fed will be tapering of QE Infinity. Gold which was safe heaven for investor has been quiet volatile off late, So investor looking for stable and non volatile instruments has again turned their attention to USD. So strength in Dollar Index is one of the reason Rupee is depreciating at rapid pace.

Indian Economy Remains Weak

Indian Economy is still not out of woods, Consumer and Food Inflation is still at Highs, Fiscal Deficit is large, IIP is almost flat and Growth concerns still lingers. <strong>Rating agencies has told still their is 1/3 changes of reducing rating of India from Current of BBB- with a negative outlook to JUNK status if fiscal and current deficit are not brought under control.

Rising Import Bill

India is net Importer of OIL and GOLD, with fall in GOLD prices Indian consumers are buying more gold which is increasing the gap between Import and Export  and thus we are having a huge current account deficit and it putting more pressure on Rupee.

Euro Zone Recession

Eurozone is still battling with recession, Imports are coming under pressure as due to almost nil growth in Eurozone , Euro is trading well below its psychological level of 1.30. ECB has also committed to flood market with Euros if economic data does not imporove hence putting further pressure on EURO and lead to Buying in USD which will further put pressure on Rupee.

Weakness in domestic equities

Foreign institutional investors have been selling index futures in the last week. This is a hedging move as FIIs expect stocks (cash segment) to fall in the near term, traders said. FIIs have been a key support for markets (and the rupee) after buying over $15.38 billion (Rs. 90,000 crore) worth of shares this year as of last week.



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