The Indian Rupee hits a low of 58.1722 per U.S. Dollar yesterday, surpassing the previous record low of 57.3275 set in June 2012.
The traders may continue shorting rupee which may fall up to 58.91 with immediate support at 58.135 and thereafter at 58.54. The Indian Rupee may strengthen a wee bit today in case steps are taken by RBI to arrest the fall, in which case the currency will meet resistance at 57.03.
Thanks to the Government of India's mismanagement of current account, trade and budget deficits as well as of countering inflation. The Rupee must tumble further.
Nonetheless, it is not bad news for all even though the noise being made by the press gives the signal of doom and calamity as it is busy hollering red. In fact the exporters have a chance to rejoice for now they will be getting more rupees for every dollar earned abroad. Moreover, it also benefits those working abroad and sending money to their families and a golden opportunity to them if they are investing in local assets.
For individuals and exporting business house, the news may be good but for the government it may be an advance signal to open its eyes and do something to contain the exchange rate.
The slide in the value of the Indian Rupee is on account of the ever increasing current account deficit, trade deficit and budget deficit. An in crease in the cost of dollar implies further increase which will weigh heavily on account of the upcoming oil bill which is paid in dollars. The problem is where will the govt get the ever increasing quantity of dollars from in order to pay the oil bill.
However on the flip side, it is a welcome news in that there should be a check on the ever increasing vehicles on the road as the cost of fuel goes up in an over populated nation.
An Indian Rupee- US $ graph over a longer period is presented below to get a clear picture.
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