There is a misconception being spread that Indian rupee is becoming weaker & falling against foreign currencies.
1 Japanese Yen was equal to 0.70 Rs in 2021 & now it is 0.58 Rs.
1 Euro was equal to 87 Rs in 2021 & now it is 80
1 Pound Sterling was equal to 101 Rs in 2021 & now it is 94
1 French Franc was equal to 13.6 Rs in 2021 & now it is 12.2
& So on…….
As one can see Indian Rupee has become stronger against these currencies during the last year. So Rupee is not becoming weaker against foreign currencies.
Now let us come to US Dollar which is rising against Rupee & every other currency.
Why ?
Is the US economy doing great? No. In fact inflation today declared in the US is 9.1%. This means interest rates will be raised again by 75 basis points & maybe 100 basis points. The US is raising its interest rates for a few months now. Due to this US bond yields are rising which makes investing in them attractive for US financial institutions. They withdraw money from markets of other countries & invest in US Bonds. This increases dollar demand & it becomes stronger against other currencies including the Rupee. The dollar index which is an indicator of dollar strength used to be in the 90s & is now at 108. All-time high.
If the Dollar Rupee exchange rate is rising it is not India's doing but India is doing what it can do by opening a window for international trade in Rupee with countries like Russia, Iran etc. This will increase demand for Rupee & reduce demand for Dollar.
Is a strong dollar good for US? No, it is not but they have no choice except to raise interest rates to control rising inflation. FYI US inflation is now more than inflation in India. High-interest rates mean companies in the US can no longer get cheap money. It will affect their production & growth. That will come in a few quarters.
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