Dollar flying or Rupee falling (Explained)

 Dollar flying or Rupee falling (Explained)

If someone has basic knowledge of economics, will know answer of this question but in India, standard of journalist n leaders is so low that they even don't know such basics

This post will answer - dollar flying or rupee falling

There are around 200 countries in the world n each have their respective currency and all currencies maintain exchange rate with currency of other countries.

Exchange rate of currency depends upon supply and demand of that currency. Now the question dollar is strengthening or rupee is weakening

Check USD INR performance of last 1 year

Oct 2021 : 1 USD = Rs 75
Oct 2022 :1 USD = Rs 82

Its due to good performance of USD or due to bad performance of INR ?

We can't say on the basis of that curve

To check this, we have to find -

1 How Rupee is performing against another major currencies of the world ?

2. How other currencies r performing against USD ?

If rupee is falling against other currencies also then we can say rupee is falling, If other currencies also falling against USD then we can say its dollar is strengthening. British Pound, Euro and Japanese Yen r the other major currencies of the world.

Lets check Rupee vs Pound
Oct 2021 - 1 GBP = Rs 104
Oct 2022 - 1 GBP = Rs 92

So in 1 Last Year Rs strengthened against GBP

Lets check Rs vs Euro

Oct 2021: 1 Euro = Rs 88
Oct 2022: 1 Euro = Rs 82

So Rs strengthened against Euro also

Lets check Rs vs Yen

Oct 2021 : 1 Yen = 0.65 Rs
Oct 2022 : 1 Yen = 0.55 Rs



So Rs strengthened against Yen also

In last 1 year Rs weakened against dollar but strengthened against all major currencies. It gives indication that Rs is not falling

Lets check performance of these

currencies against dollar



For that we will check dollar index
dollar index measures relative performance of dollar against 6 major currencies of world including GBP, Euro n Yen

Oct 2021: USD value agst 6 major currency = 93
Oct 2021: USD value agst 6 major currency = 112

So it proves that rupee is not falling, its actually dollar is strengthening. Rupee is fighting bravely against dollar and performing very well compares to other currencies n India really deserve appreciation of it.
                        

                              

Reason for this
Petrol import covers 30-40% of our total import

In last 1 year, due to Russia Ukraine war, prices of oil and gas is sky rocket.
India import bill is getting higher
Oil is traded in USD
Import high, export less means
demand of USD high, demand of INR less

So despite of such negative condition, INR fighting bravely
n performing well against other currencies.

Now let me tell the reason why Dollar is sky rocket.

Reason is US federal reserve rate that was 0 in Feb 2022 and now its 3.5%

Now understand this
American banks need to maintain a fix amount to US fed bank n for that on daily basis
they keep taking loan from another bank and interest rate on that loan is called fed interest rate.

When fed increase that interest rate then all investors of the world, take out money from their current investment n invest into US fed bank coz investment in Fed bank is considered safest investment in difficult situation.

U can invest in fed bank only in USD so u need USD for it so demand of USD increase n prices of USD goes high n exactly this happened in last 6 months

Why fed increased interest rate ?
To control the inflation
As interest goes high Interest rate of saving account, FD also increase, credit card, home loan interest goes high

people stop spending n start investing, circulation of money goes down in market, demand goes down n price comes down

Basic economics
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So to control inflation US increased fed rates due to that USD demand increased n USD strengthened agst all currencies

So final conclusion its USD is strengthening, Rupee is not weakening but I will tell u one case when actually Rupee weakened n that happened in during 2008-14

check the fed rates of last 40 years FED rates were 0 during 2010-14

Now check the dollar index of last 40 years

2001-03
and 2022
was the time time when dollar was very strong

2008-14 was the time when dollar was weak against all those 6 currencies Now check performance of Rs and USD during 2008 -2014

2008 : 1 USD = Rs 40
2014 : 1 USD = Rs 63

Even when dollar was weak globally, Fed rates were 0, INR kept falling and fell around 50%

That's called Rupee was falling.So now u have all data

U know basic economics

Irony of this country is that standard and intent of our Opposition leaders and journalist is so low that they don't miss any opportunity to defame their own country.