- Opposition parties have been trolling Finance Minister Nirmala Sitharaman for saying in the United States that the fall in the value of the rupee was the result of the strengthening of the dollar.
- Rahul Gandhi mockingly said the government would now claim that India’s low rank in the global hunger index was because people in other countries were no longer feeling hungry.
- Asked about the challenges the rupee faced and what measures were being taken to tackle its “slippery slide”, Sitharaman said: “First of all, I would look at it as not rupee sliding, and look at it as dollar strengthening…dollar strengthening incessantly. So obviously all other currencies are performing against a strengthening dollar and… I am not talking technicalities but it is a matter of fact that India’s rupee probably has withstood this dollar… You know, rates going up, exchange rate in favour of dollar strengthening is there and… I think Indian rupee has performed much better than many other emerging market currencies…”
Is Dollar really strengthening?
- Yes, it has been strengthening “incessantly”, as Sitharaman said. To take the example of the rupee, a dollar was Rs 74.50 on January 1, it is more than Rs 82.30 now. The value of the dollar has been racing upward for more than a year now – against nearly every currency around the world.
- So, the euro, which was 0.88 against the dollar on January 1, is now 1.02, and the British pound, which was 0.73 against the dollar at the beginning of the year is now 0.89. Over this same period, the Australian dollar has gone from 1.37 to 1.61, and the Japanese yen has zoomed from 115 to 148 against the dollar.
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Why is Dollar strengthening?
- At a very fundamental level, the US economy is doing better than other economies. Despite very high rates of inflation, the American job market has done extremely well and sectors like services have remained resilient.
- This has increased confidence in the market, and offset concerns such as those over a slowdown in the housing sector.
Is Indian Rupee doing better than other currencies?
- Yes, it is. While the rupee lost 2.6% against the dollar in September, breaching the psychological marks of 81 and 82, It has been among the more stable currencies in the current environment that has impacted, in varying degrees, almost all currencies and economies.
- Therefore, the Korean won declined about 6 per cent against the dollar in September, and the British pound lost almost as much. The Australian dollar declined 4.8%, and the Swedish krona, Chinese yuan, and Philippine peso fell 4.6%, 4.1%, and 4.1% respectively