The rupee reached its record all-time low today i.e. on 3 February. There was a fall of 67 paise against the US dollar and it has reached an all-time low of Rs 87.29 per dollar. According to experts, the reason for this fall in the rupee is Trump’s imposition of tariffs on Canada, Mexico and China, which Forex traders have called the first step of a global trade war. Apart from this, geopolitical tensions have also had a negative impact on the rupee.
Trump Imposes Extra Tariffs on Canada, Mexico, and China
On February 1, US President Donald Trump had announced 25% tariff on Canada and Mexico and additional 10% tariff on China. However, he did not take the name of India during this period. Earlier, at an event in Florida, he had threatened to impose high tariffs on countries like India, China and Brazil.
Trump has several times threatened to impose 100% tariffs on BRICS countries. India, Brazil and China are part of all three BRICS. Apart from this, Trump has complained about India imposing excessive tariffs on American products. In such a situation, there was a threat of tariff on India also.
imports will be expensive
Fall in rupee means that import of goods is going to become expensive for India. Apart from this, traveling and studying abroad has also become expensive. Suppose, when the value of rupee was 50 against the dollar, then Indian students in America could get 1 dollar for 50 rupees. Now for 1 dollar students will have to spend 86.31 rupees. Due to this, everything from fees to accommodation, food and other things will become expensive.
The Impact of Dollar Movements on the Value of the Rupee
If the value of any other currency decreases in comparison to the dollar, it is called falling, breaking, weakening of the currency. Currency Depreciation in English. Every country has foreign currency reserves with which it conducts international transactions. The effect of increase and decrease in foreign reserves is visible on the price of currency.
If the dollars in India’s foreign reserves are equal to the rupee reserves of America, then the value of the rupee will remain stable. If our dollar decreases, the rupee will weaken; if it increases, the rupee will strengthen. This is called floating rate system.