The Indian rupee closed at a new record low of 58.15 against the dollar on Monday — a drop of 110 paise over its previous close — and looked on course to breach the 60 to a dollar mark amid strong signs of recovery in the US economy that is prompting global investors to withdraw money from emerging economies.
A weaker rupee, which has fallen by over 5% since May, will make studying or travelling overseas costlier by making buying dollars expensive. It will also push up prices of all imported goods such as crude oil. Costlier crude and the resultant increase in fuel prices can fuel inflation by knocking up prices of most goods.
A weak rupee is also a warning sign of dipping investor sentiment in a slowing economy that is struggling to rein in a widening current account deficit (CAD), or, the difference between dollar inflows and outflows.
The government, however, exuded confidence that the rupee will stabilise soon.
“If you see weakening of all currencies vis-a-vis the dollar, the rupee is also not unaffected in that sense. But I think this is panic (in) the market which is unwarranted,” economic affairs secretary Arvind Mayaram told reporters on sidelines of a workshop here.