Despite the rupee being one of the worst performing currencies of the year, the currency rose sharply against USD on Wednesday, closing at 72.37. This is the best single-day gain since March 2017.
The rupee has depreciated at 12% against the dollar, with measures being undertaken by the Government that will look to stop non-essential important to stop the devaluing of the currency.
One of the steps being taken is asking oil companies to lock in their purchase prices, as this is one of the reasons as to why the rupee is feeling so much pressure.
There is also speculation from investors that the Reserve Bank of India will need to up interest rates to help support the rupee moving forward.
Outside opinion also feels that India mat look to safeguard the rupee by raising import duties on items used in mobile handsets. Much of the time, such components are imported from China.
Gains in the rupee can also be attributed to the weakness of USD. This is due to the ongoing trade negotiations, which saw the United States dollar trade at its lowest level in two months.
At the end of August, the Indian rupee has dipped to an all-time low of 70.52, decreasing 42 paise against USD.
INR was damaged by a demand for American currency from importers, which consisted primarily of oil companies.
Demand for crude oil means that shale producers can enter the market, which will hap keep prices to around $80 per barrel.
Unemployment Plays a Role
As well as its heavy reliance on oil imports, unemployment can also be cited as another reason as to why the rupee continues to struggle, despite its recent gains. It was reported that 25 million has applied for 90 thousand railway jobs. This partnered with comments from BJP politicians that sell pakoda is seen as a career gives an overview of how limited opportunities are.
It is uncertain as whether current policies are a reason for the high unemployment rate, or whether the education system is failing when it comes to creating potential graduates.
Asian shares have also increased, thanks to the US-Mexico trade deal, but this was soon overshadowed by doubt, as there were still deadlines on tariffs to consider.
Credit Not Available for the Economy
India’s current bond market is small, meaning that financing is becoming a problem. As gross domestic product us less than 15%, and the number of unpaid debts currently recorded means that the bond market needs to be expanded, otherwise opportunities to offer credit in the future could be limited.
GBP and USD have also been fluctuation due to Brexit talks and trade negotiations respectfully. The pound sterling forecast was improved thanks to strong retail sales, while foreign exchange in relation to both could vary depending on the decisions made.
Both the United State dollar and pound sterling forecast have been looked upon confidentially, although exchange rates could still vary.