Professional Documents
Culture Documents
Dollar Rupee
Dollar Rupee
Causes-:
1) Anticipation of Tapering of quantitative easing from US federal bank.
2) During recession US Federal bank decided to give stimulus to economy thus infusing truck
load of cash in market at very low interest rate,this cheap money found it's way in emerging
markets like India(because intrest rates in US were low investors were not getting enough
return on their investment) where it got good returns.
3) But now prospects of return on investment has become better in US so all the cheap
money(dollars) which came in India during recession is going back to US because now they
can fetch better returns there.(Demand of dollar increases and it's value goes up)
4) Syrian crisis has been an addon to this situation ,but how?
If US plans to attack Syria than it would be requiring truck load of money to carry out it's
operations,what will the government do?..it will issue bonds with higher return rates so
people will start buying these bonds instead of investing in markets like India,inflow of
dollar in India will again take a hit and rupee will decline more.Moreover US will demand
more oil to carry out it's operations and supply will take marginal hit (Syria is marginal
exporter of oil) so prices of crude oil in world market will sore(demand increases sharply
and suppply takes a hit).
5) Policy bottlenecks -: time and again we hear that govt has increased FDI cap in this
sector and that sector but merely increasing the cap will not result in coming of actual
FDI,and we rank deep in list of nations in respect of ease of doing business.A reason
why investors are not investing there dollars in India.
6) Huge demand of crude oil and gold , the demand of dollar rises to buy them and rupee
takes a hit subsequently widening the Current Account Deficit.
7) Export of Iron ore from the mines of Goa and Karnataka has been stopped because of
Supreme court order to stop mining in these areas.(Dollar inflow takes a hit)
Full name
Nikhil Sharma,