Dollar vs Rupee - A friend of mine from US Explained Dollar flying or Rupee falling?

 

Dollar vs Rupee

 

A friend of mine from US Explained

Dollar flying or Rupee falling?

 

If someone has basic knowledge of economics, they will know the answer to this question but in India, the standard of journalists and leaders is so low that they even don't know such basics.

 

There are around 200 countries in the world and each has their respective currency. All currencies maintain the exchange rate with the currency of other countries. Exchange rate of currency depends upon supply and demand of that currency.

 

Now the question dollar is strengthening and rupee is weakening

 

Check USD INR performance of last 1 year

Oct 2021 : 1 USD = Rs 75

Oct 2022 :1 USD = Rs 82

 

Is it due to good performance of USD or due to bad performance of INR ?

 

To check this, we have to find -

1 How Rupee is performing against another major currencies of the world

2. How other currencies r performing against USD

If the rupee is falling against other currencies also then we can say the rupee is falling.

 

If other currencies are also falling against USD then we can say its dollar is strengthening.British Pound, Euro and Japanese Yen r the other major currencies of the world.

 

Let's check Rupee vs Pound

Oct 2021 - 1 GBP = Rs 104

Oct 2022 - 1 GBP = Rs 92

 

So in 1 Last Year Rs strengthened against GBP

 

Lets check Rs vs Euro

Oct 2021: 1 Euro = Rs 88

Oct 2022: 1 Euro = Rs 82

So Rs strengthened against Euro also

 

Lets check Rs vs Yen

Oct 2021 : 1 Yen = 0.65 Rs

Oct 2022 : 1 Yen = 0.55 Rs

So Rs strengthened against Yen also

 

In the last 1 year, Rs weakened against the dollar but strengthened against all major currencies. It gives indication that Rs is not falling.

 

Lets check performance of these currencies against dollar

For that we will check dollar index

 

dollar index measures relative performance of dollar against 6 major currencies of world including GBP, Euro n Yen

 

Oct 2021: USD value against 6 major currency = 93

Oct 2021: USD value against 6 major currency = 112

 

So it proves that the rupee is not falling, it is actually the dollar is strengthening. Rupee is fighting bravely against dollar and performing very well compares to other currencies n India really deserve appreciation of it.Reason for this

 

Petrol import covers 30-40% of our total import

 

In the last 1 year, due to the Russia Ukraine war, prices of oil and gas have sky rocket.

India import bill is getting higher

Oil is traded in USD

Import high, export less means demand of USD high, demand of INR less.So despite such negative conditions, INR is fighting bravely in performing well against other currencies.

 

Now let me tell you the reason why the Dollar is a sky rocket.

 

Reason is US federal reserve rate that was 0 in Feb 2022 and now its 3.5%

Now understand this

American banks need to maintain a fixed amount to US fed banks for that on a daily basis.

They keep taking a loan from another bank and the interest rate on that loan is called fed interest rate.When fed increases that interest rate then all investors of the world take out money from their current investment n invest into US fed bank coz investment in Fed bank is considered safest investment in difficult situations.

 

U can invest in fed bank only in USD so u need USD for it so demand of USD increase in prices of USD goes high n exactly this happened in last 6 months

 

Why is the fed increased interest rate ?

To control the inflation

As interest goes high Interest rate of saving account, FD also increase, credit card, home loan interest goes high people stop spending n start investing, circulation of money goes down in market, demand goes down n price comes down

 

Basic economics

 

So to control inflation US increased fed rates due to that USD demand increased n USD strengthened agst all currencies.

 

So final conclusion its USD is strengthening, Rupee is not weakening but I will tell u one case when actually Rupee weakened n that happened in during 2008-14

 

check the fed rates of last 40 years

Fed rates were 0 during 2010-14

 

Now check the dollar index of last 40 years

2001-03 and 2022 was the time when the dollar was very strong. 2008-14 was the time when the dollar was weak against all those 6 currencies.

 

Now check performance of Rs and USD during 2008 -2014

 

2008 : 1 USD = Rs 40

2014 : 1 USD = Rs 63

Even when dollar was weak globally, Fed rates were 0, INR kept falling and fell around 50%

 

That's called Rupee was falling

 

So now u have all data

 

U know basic economics

 

Irony of this country is that the standard and intent of our Opposition leaders and journalists is so low that they don't miss any opportunity to defame their own country.

 

Morons with zero knowledge should stop talking gibberish and educate themselves.

Jai Hind!

Article by G B Reddy Sir