Rupee experiences its highest monthly depreciation as US dollar strengthens, oil prices rise

Due to an increase in crude oil prices and a stronger US dollar, the rupee saw its highest monthly depreciation on Tuesday.

According to Bloomberg statistics, the rupee decreased by 29 paise to close at Rs 83.04 versus the dollar on Tuesday. On August 2, it had decreased by 33 pence.

“This depreciation can be attributed to the overall strength of the US dollar and a significant increase in crude oil prices, which surged by more than 10 per cent to reach $85 per barrel,” Financial Express quoted Jateen Trivedi, VP research analyst, LKP Securities, as saying.

As a result of Russia and Saudi Arabia extending supply curbs through the end of the year, crude oil prices have reached a 10-month high.

The purchasing power of the rupee weakens when it depreciates against other currencies, especially. This leads to customers having to paymore for imported goods and services.

Over 80 per cent of India’s crude oil is imported, and inflation is the main effect of a weakening rupee.

On September 5, the dollar index increased by 0.4 per cent against the Indian rupee. Analysts say that the rupee’s decline could be linked to persistent weakness seen in Asian currencies in addition to projected dollar outflows.

The rise in the dollar index signals the anticipation of a future increase in interest rates, which will have an effect on the rupee market.

The Financial Express quoted Nirpendra Yadav, senior commodity research analyst, Swastika Investmart, as saying thatChina’s slower economic performance has put pressure on the Asian currency markets.

Analysts also predict that the Federal Reserve meeting, which is scheduled for later this month, will have an impact on the movement of the rupee.

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