With days passing, and with no signs of Russia taking any step back from Ukraine and continuing its operation to invade Ukraine and achieve its motive, all commodities are skyrocketing. The dollar being the favorite commodity during panic times after the yellow metal gold has started to appreciate among Indian currency and even against the basket of major currency.
The Indian rupee has been struggling hard to hold on to its value even at Rs 73-Rs74. With crude oil prices going high and US fed dwelling its stance on interest rate coupled with an ongoing geopolitical hue between Russia-Ukraine INR is continuously losing its value against green bucks. The last highest level seen by USDINR was at 77.018, on 22 April 2020. After twenty-two months, INR saw a level of 77.17. Further continuous pulling out of investment by foreign institutional investors also weighed heavily on Indian Currency. To date of March 2022, FII’s have made a net sale of Rs18,614.61 crores.
Implication on Indian Economy for INR depreciation
- This will give some boost to export, as the export will get cheaper.
- Imported products will become relatively costly, like crude
- NRI investment in the market may increase
- Stock markets become jittery. (Nifty continued to weaken for three consecutive sessions and has breached the level of 16,000)
The dollar index indicates the value of the dollar relative to the value of a basket of six currencies of the majority of the U.S.’s most significant trading partners. The basket includes Euro, Swiss Franc, Japanese Yen, Canadian dollar, British pound, and Swedish Krona.
The dollar index has touched the level of 99.21 as of 7th March 2022, a level last seen almost in May 2020, during the beginning stage of pandemic Covid-19. The dollar index has been continuously rising for the past 10 months. Since the start of Russian military intervention in Ukraine, green bucks seem to be flexing muscles economically, with their value appreciating every single day in the last week.
Investors must stay cautious, as the dollar may continue to appreciate against major currencies and Indian currency as well until a solution is found for the Russia-Ukraine tension is found.