Govt lists major reasons behind rupee fall: Pandemic, US-China trade war, Fed rate hike, rise in oil prices, among others

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The Centre has listed a host of reasons for the rupee hitting historic lows in recent months. These include Covid-19 related economic disruptions, US-China trade war, soaring crude oil prices, Russia-Ukraine war.

In a written reply to a question regarding the reasons for fall in rupee value, the government said exchange rate of the Indian rupee is market determined and there are numerous factors behind the drop in rupee value against the American currency.

“Various global factors have contributed to depreciation of the Indian Rupee over the years which included, US-China trade war in 2018, rate hike by the US Federal Reserve in 2018 & Covid related disruptions in 2020,” MoS Finance Pankaj Chaudhary said in his reply in the Rajya Sabha on Tuesday.

The rupee pared its initial gains to settle flat at 79.78 on Tuesday due to firm crude oil prices and forex outflows amid expectations of a sharp hike in interest rates by the US Federal Reserve. From its all-time lowest level of 80.05, hit on July 19, the currency has regained 27 paise.

Reserve Bank Governor Shaktikanta Das on Friday said the central bank has not set any target as far as the rupee’s current level against the US dollar is concerned, even as he made it clear that the RBI has “zero tolerance” for high volatility in the domestic currency.

Spillovers from the global monetary policy tightening, commodity prices, geopolitical risks have become overwhelming for the currencies across the world. The Indian rupee is holding up well as compared to several developed economies, Das said.

Foreign Portfolio Investors (FPIs) had been selling equities in the Indian markets for the past nine-to-ten months.