6/5/2023 0 Comments Dollar to rupee moneycontrol![]() The 1966 devaluation experience reinforced India’s determination to incorporate a symmetric gold clause in future Rupee payment agreements. ‘Like Pair of Scissors’: On India’s Trade Deficit With China, FM Sitharaman Explains ‘Twin Game’ | Exclusive This caused great concern in India because at the time of the devaluation, only a quarter of the trade planned for the 1966 calendar year had been achieved. Not only did India discover that it was now on a sticky legal wicket - with the Soviet Union determined to dig in its heels and insist on the application of this clause to contracts between the two countries and the other countries waiting to see how this test case would be resolved - Rupee trade between India and east Europe came to a virtual standstill immediately after the devaluation. The devaluation of 1966 turned the spotlight on the gold clause. The Reserve Bank was not in the picture when these agreements were made, and when little thought appears to have been given to the significance of this clause. Under the so-called gold clause in many of these agreements, the exchange value of the Rupee was fixed in terms of gold, thus effectively protecting holders of Rupee governed by such agreements from devaluation. In early 1960s, the Rupee was the unit of account in India’s payment agreements with eastern Europe. But this, as per the RBI, “makes the simultaneous pursuit of exchange rate stability and a domestically oriented monetary policy more challenging, unless supported by large and deep domestic financial markets that could effectively absorb external shocks.” Lessons from History ![]() Internationalisation of Rupee can lower transaction costs of cross-border trade and investment operations by mitigating exchange rate risk. The dollar has been the world’s principal reserve currency since the end of World War II and is the most widely used currency for international trade. Also balancing the strengthening or weakening of a currency means fixing of rates, impacting exports and imports. Current global dynamics of trade demand availability of free currency, which is acceptable to both parties before such transactions are executed. The Rupee trade has been a point of discussion for over a decade now, but it never took off largely due to various geopolitical and economic constraints. One of the best ways to counter this trade deficit is by introducing Rupee trade for major imports. The broader NSE Nifty advanced 1.55 points to 18,265.95.India operates a huge trade deficit in excess of $150 billion. On the domestic equity market front, the 30-share BSE Sensex closed 2.92 points lower at 61,761.33. We expect USD/INR spot to trade in between 81.60 to 82.75 in the near term," Choudhary added. Investors may remain cautious ahead of inflation data from India and the US later this week. “However, softening crude oil prices at higher levels and FII inflows may support the rupee at lower levels. “We expect the rupee to trade with a negative bias on the strong Dollar amid safe haven appeal on the back of risk aversion in global markets and worries over a global economic slowdown. “US Dollar gained on risk aversion in global markets and as the Federal Reserve’s Senior Loan Officer Opinion Survey shows banks continued to tighten credit conditions for business and households, but it was better than expected," Choudhary added.īrent crude futures, the global oil benchmark, declined 0.88 per cent to USD 76.33 per barrel. The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.10 per cent to 101.47. ![]() However, soft crude oil prices cushioned the downside, said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas. ![]() The rupee depreciated and is at its lowest level in two and half weeks on the positive US Dollar index. On Monday, the rupee settled at 81.78 against the dollar. The rupee fell 27 paise to close at 82.05 (provisional) against the US currency on Tuesday, weighed down by a strong greenback against major rivals overseas and a muted trend in domestic equities.Īt the interbank foreign exchange, the domestic unit opened at 81.84 against the dollar and slipped below the 82 levels to close at 82.05 (provisional), down 27 paise from its previous close.ĭuring the day, the rupee witnessed a high of 81.83 and a low of 82.15 against the greenback. ![]()
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