The Indian Rupee touched a new low and is at the 77.42 mark against the US dollar on Monday. As a result of the slip in value, the NSE Nifty 50 index was down 1.06 percent, and the BSE Sensex was down by 1.09 percent.

The rupee opened at 77.17 per dollar, then fell 52 paise from Friday’s closing at 76.90 to 77.42, dropping past the previous all-time low of 76.98 set in March. On Friday, it had plummeted 55 paise to end at 76.90 against the US dollar.

The rupee’s depreciation could be attributed to demand for riskier assets as well as foreign investors continuing to dump domestic stocks. Investors are also concerned that the increasing Covid lockdown in Shanghai would lead to more decline in Asian stocks, putting global economic development at risk.

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Amid a firm dollar and pessimistic global market sentiments, the rupee is expected to depreciate today. Market sentiments were hurt as investors are concerned over surging inflation, monetary policy tightening across major countries around the globe, economic slowdown, and escalating geopolitical tensions. Moreover, market participants fear that rising crude oil prices will hurt India’s trade and current account, said brokerage ICICI Securities before the markets opened for the day.

On Friday, the rupee plummeted dramatically as the prices of crude oil increased. After a surprise rate hike by the Reserve Bank of India on May 5, the rupee managed to gain momentum against the US dollar, as US Fed Chairman Jerome Powell rebounded against a 75-basis-point rate hike in subsequent months.

The 30-share Sensex fell 737 points, or 1.34 percent, to 54,098.58, while the broader NSE Nifty fell 220.25 points, or 1.34 percent, to 16,191.00. Brent crude futures rose 0.14 percent to USD 112.55 a barrel, setting a record high for the global benchmark.

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The ongoing Russia Ukraine war has not impacted just these two countries’ GDP but also affected the economy globally. India is one such country that is primarily affected by Russia’s invasion of Ukraine. The value of the Indian currency has declined to an all-time low.

The Indian rupee fell to a record lifetime low of 76.97 against the US dollar. It’s due to a significant increase in international crude oil prices, which has threatened to raise imported inflation and deepen the country’s trade and current account deficit.

Global crude oil prices were nearing record highs after reports said that the US and its European allies are considering barring Russian oil imports in response to the country’s invasion of Ukraine. Brent crude oil hit a high of USD 139.13 per barrel, before easing a bit.

Which is the most powerful currency in the world and how does it determine the value of other currencies?

US dollar is the most powerful currency in the world. All the trading in the world is done in US dollars. Each country has its own currency and its value is determined by the economic concept of Demand and Supply.

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The value of a currency that is in higher demand has a higher value. The value of a currency is determined by economic factors such as trade, inflation, employment, interest rates, growth rate, and geopolitical situations.

The concept of currency fluctuation is part of the larger Foreign exchange market.

What is Foreign Exchange Market?

The Foreign Exchange Market is mainly a global market for currency trading. One currency is exchanged for another at a particular rate. The rate at which two particular currencies are exchanged is called the exchange rate.

The value of one country’s currency in relation to another country’s currency is known as the exchange rate.

How does US Dollar determine the value of Indian currency?

The US dollar is in high demand because India imports more goods from the US than it exports. The demand for the US dollar will rise in this situation because more dollars will be paid to the US while purchasing products from them.

To pay for these goods, more dollars will have to be purchased on the foreign exchange market in India. As a result, demand for US dollars will rise compared to the Indian rupee, boosting their value.

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However, if the Indian Rupee’s value plummets dramatically, the government will step in. They will aim to decrease the supply of Indian rupees immediately to compensate for the low demand. They will purchase the Indian rupee on the market with US dollar reserves. As it buys more Indian currency with US dollars, the supply of Indian currency falls while the supply of US money rises, resulting in an increase in the rupee’s value and a reduction in the dollar’s value.

If the oil prices keep increasing at this rapid rate then the Indian currency could head towards 79 per dollar soon.

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