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The Indian Rupee has slipped to a historic low as it crossed the 90 mark against the US Dollar for the first time. This fall has created worry among investors and the general public because the currency has been weakening for several months. In the last one month the Rupee lost more than one percent. In the last three months it lost around two percent. Over the past six months the fall has reached nearly five percent which makes it one of the weakest currencies in Asia during this period.
There are several reasons behind this steady decline. One major reason is the delay in a key trade agreement that the market was expecting to be completed soon. The delay has created uncertainty and reduced confidence. Another reason is the continuous drop in India’s exports. Exports fell by nine percent in the most recent month and this has reduced the flow of dollars into the country.
At the same time imports have reached record levels. Silver imports in particular went up sharply during the festive season which pushed the import bill even higher. Because exports are falling and imports are rising the trade deficit has reached nearly forty two billion dollars and this has added further pressure on the Rupee.
Most of the export decline came from the US market where sales dropped by nine percent. The Reserve Bank of India has been using its foreign exchange reserves to support the currency but it cannot continue doing this forever. Importers and speculators are buying more dollars and this extra demand has pushed the Rupee down even further.
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