Dollar Vs Rupee - The Currency Fight
meera • onFinance 11 years ago • 4 min read

Like past few weeks, whenever I happen to see the exchange rate comparison in the evening news, I see the US dollar value dropping day by day instead of going up which was the case in the past. Its surely grabing lot of attention these days among the economist and traders all over the world.

Just in few months, dollar value has gone down around 35% pairing with most famous currencies like EURO, YEN, JPN and SWISS.  Like every other NRI, especially I was watching very closely Rupee (Rs) over US ($) value. It seems in just last year or so, US dollar has come down 7 to 8 over the Rupees. As an Indian, I am happy to see that Rupee is gaining strength but on the other side as an NRI  I was bit concerned.

Why Dollar weakening? In general the weaking effect of Dollar can be contributed by various factors like government, market forces of supply and demand for a particular country's currency, interest rates, inflation, and consumers' expectations about what will happen in the future. At present financial experts seems to point  out the feat factor on lot of economical aspects like Housing market crash, consumer slow down, oil price increase being the culprits. They predict that the collapsing dollar will dramatically accelerate U.S. inflation and will pressure upward U.S. long-term interest rates.

I am sure many of you might have seen a popular forward email about India becoming a super economic power with a reverse trend happening like,

  • Americans waiting in big lines at the Indian Embassy for work visas

  • Value of Rupee goes up lik 1 Rupee = 45 dollar

  • Americans take telephone interviews for Indian Jobs

We already seen most of it happening right now except the dollar value reversal. Looks like the days are not too far for that one to be true.  In yesterday's news, Financial minister P.Chidambaram commented that "US dollar weaking is really good for India as it benefits India in lot of ways while our trader and exporters are struggling with it. Buying price of oil is little cheaper and also it really slows down our inflation rate".

Is this a Good news for Indians or Bad one for NRI's? I somehow have a mixed feeling on it. May be its a good news as we see Rupee is gaining strength over Dollar. But in lot of ways it really hurts the Indian Export industry and NRI's very importantly.

How does it affect really?

Because of the Dollar value weakening, the buying power of the dollar has gone down and you end up buying less compared to a year back. So exporters who get paid by dollars are seeing crunch in their profit margins. This really makes big impact when you are competiting with other global countries.

On the other instance, NRI's investing back at home will have major set back. For example, past year if you can buy 4.5 lakhs worth of property in just $10000 now it needs $11500, an increase the dollar spend. Similary if an NRI is sending money back home an average $1000 yielded 43,000 rupees after commission but not only yield 39,000 rupees. On average 8% decrease in the yield. I knew lot of NRI's who wanted to take advantage of the high interest rate in India, so converted their money and saved in Indian Banks which also helped India forex. Now with current dollar value reduction, NRI's are losing lot of money on conversion day by day which surely not encouraging the savings idea in India.

Overall, Dollar weakening is really good think for India on a broader outlook but it does truely affects many Indian exporters and NRI's in particular to a large extent.  There is a lot of hope that its just a short term trend and should revert back pretty soon as its all part of a cycle.

India

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  • Guest 9 years ago

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