Indian rupee is persistently devaluated as compared to US dollar. Currently in 2020, Indian rupee is 75.80 per dollar. After COVID-19 pandemic the situation of our currency could be worse. Recently I.M.F has announced that corona virus containment measures are severely affecting economies around the world that clearly is indicative of economic slowdown in upcoming time.
Rupee hits an all time low of 76.87 against USD- Rupee loses its value and falls down to an all time low of 76.87 against US dollar. The rupee has opened up at 76.74 and fell to a new low of 76.87, further fall from last week's low of 76.55 per US dollar. The major reason for falling rupee value is strengthening US dollar value against a number of currencies due to investor's are shifting their portfolio to safer currencies amid increasing fears and uncertainty.
The Indian rupee plummeted by 43 paise and has reached all time low. On Wednesday, the rupee had settled at 76.44 against the greenback. The cases of coronavirus are breaking records each day causing panic among forex traders as they shift to more safer investments. The dollar index, which measures the greenback's strength against six major currencies, rose by 0.29 per cent to 99.75. Rupee may fall beyond 77 per US dollar. The strength of US dollar pushed Indian rupee to record new lows. The cases of coronavirus all across the world have crossed 20 lakh and India's reported cases have gone over 12000.
The industries are in losses, business operations are on halt and trade is not permitted together driving the economy to suffer a lot. ICRA has further cut india's growth prediction and said that GDP will increase 2% this fiscal year.
Anindya Banerjee, DVP, currency derivatives and interest rate derivatives at Kotak Securities, said- Indian rupee continues to weaken due to rising cases of COVID-19 in India. Global situation remains fluid as number of cases continue to risk in Europe and North America but in several nations, the rate of increase continues to slow, which is a positive development. All in all, rupee may continue to weaken, but some of these positive development in home and abroad may limit the pace of the decline. A range of 76.00-77.50 may unfold over the medium term.
Risk aversion and flight to safety has returned in global markets. US treasury yields are lower, commodities and commodity currencies are weak, equities are weak and we are seeing broad USD strength, said Abhishek Goenka, founder and CEO of IFA Global.
Although you will be surprised to know that in 1925, 1 rupee was equal to 10 $ and during independence 1 rupee was equal to 1$.So, the question arises that why Indian currency has experienced such decline. Many reasons are responsible for the continues devaluation of Indian currency against US dollar, devaluation stands for reduction in external value of the domestic currency while internal value of domestic currency remains constant lets evaluate it one by one-
1. Lack of funds during partition
2. Wars after independence with Pakistan and China
3. Famines in 1960s and lack of buffer stock led to imports of grains from other countries
4. Political instability led to economic disturbances
5. 1991 economic crisis ,during that time fiscal deficit increased to 7.8% of G.D.P
6. Continues imports of oil and petroleum
7. These days Govt. sometimes willingly devaluates the currency to ensure that exports get cheaper and imports get costlier.
8. Making imports cheaper ensures that domestic products avail global market.
Well, for COVID-19 effects on economies I.M.F suggests that targeted support to hardest hit households and firms is needed. They say that corona virus has caused a real economic shock and requires protecting people ,jobs and industries directly .It is assumed that currency devaluation will be captured in many countries or every country so to speak. A world level strategy is indeed a need of hour otherwise the economic situation could get worse than 2008-09 recession.