The rupee devalued further on Thursday falling to a new record low of Rs 70.20 against the dollar.
The rupee, which was last at 70.1 to the dollar, further slipped to 70.20 during early trade on Thursday. According to reports, the fall was due to the drop in value of the Turkish lira, which helped the US dollar to gain. This has spread fears that the economic slump in Turkey could spread to other countries.
However, on Wednesday Union Minister Arun Jaitley said that the country has enough foreign exchange reserves to deal with the volatility and that the developments are being closely watched by the concerned departments.
The rupee has been on the downslide since the beginning of this year and has slipped around 9% in 2018. Reports also suggest heavy sell-off in global currencies increased the demand for safe-haven assets and caused the rupee to plunge. According to analysts, this crisis reflects Turkeyâ€™s refusal to raise interest rates to curb double-digit inflation.
This fall of the rupee against the dollar will go on to affect the buying capabilities of the country, aka imports. It will also start inflating household expenses and hit personal budgets.
For example, crude oil, crude palm oil, iron ore, etc. will affect the expenses of an individual in an indirect manner. Any goods that have these items as raw materials or inputs will also become more expensive.
Indian students who have taken loans to fund their foreign degrees will also be affected since students pay for their living expenses abroad in foreign currency but their loans are in rupees.
Experts opine that the consecutive hike in RBI repo rate is also a contributory factor to the falling fortunes of the Indian rupee.
As per the latest data from the RBI, its foreign exchange reserves were at $402.70 billion in the week ended August 3, down $1.49 billion when compared to the preceding week.