RECORD DEPRICIATION

OF RUPEE AGAINST
DOLLAR

ECONOMICS

Submitted to: Submitted by:

Dr. Chitra Joshi Paryushi Koshal
WHAT IS CURRENCY DEPRECIATION?

 Currency depreciation is a fall in the value of a

currency in a floating exchange rate system.
Currency depreciation can occur due to factors
such as economic fundamentals, interest rate
differentials, political instability or risk aversion
among investors.
 Recent Example of Currency
Depreciation

 Turkish Lira:
 Turkey’s currency, the lira, lost more than 40% of its value against the USD
between January and August 2018. A combination of factors led to the
depreciation. Firstly, investors grew fearful that Turkish companies wouldn't
be able to pay back loans denominated in dollars and euros as the lira
continued to fall in value. Secondly, President Trump approved the doubling
of steel and aluminum tariffs imposed on Turkey at a time when there were
already fears about the country’s struggling economy
 Brexit :
 Brexit is the most recent scenario which has impacted currency
depreciation of GBP (Great Britain Pound or Sterling) with USD. With
Britain’s decision to exit itself from European Union (EU), there was a
huge impact on GBP. Till recently, Britain has been a part of the
European Union, and hence EUR is prevalent in the UK. However, with
Brexit, UK will have its official currency as GBP (and not EUR).
 FACTORS THAT AFFECTED INDIAN
CURRENCY IN 2018

 Strong demand of US dollar: 

 Rising crude oil import bill: 
 Fed rate hike: 
 Turkey currency crisis: 
 Stock market movement:
 Crude oil boiling again:
 Trade war between US and China:
 RUPEE DEPRECIATION AND ITS CONSEQUENCES

 A weak rupee would make imports of goods and

services costlier. The firms will pass on
increased import costs to the end-consumers.
 A depreciating rupee along with higher oil prices
would prove to be a double whammy for the
Indian economy.
 . If the government asks state-owned oil firms to
share the fuel subsidy burden, it will directly
affect the profitability of these firms.
 Will a Weaker Rupee Boost
Exports?

 There are some who argue that a weak rupee

will make exports more competitive and thereby
spur exports of goods and services. A weaker
currency alone cannot boost a country’s export
while a gradual, non-disruptive depreciation as
part of a wider trade strategy can be beneficial
in the long run.
 STEPS TAKEN BY THE GOVERNMENT TO
CURB THE RECORD DEPRECIATION OF
RUPEE

 The government announced an array of steps,

including removal of withholding tax on Masala
bonds, relaxation for FPIs, and curbs on non-
essential imports, to contain the widening CAD
and check the rupee fall.
 The minister said that external factors like
policies adopted by the US, trade war and
crude oil prices are impacting economies like
India, despite "strong fundamentals"