Today we focus on understanding
- Why is the INR weakening?
- How does it affect you as an individual? &
- How can you tackle these backlashes?
Let’s dive in.
Note: The INR depreciation against the USD is a vast topic with multiple factors affecting it. This blog will focus on the most prominent & direct issue, i.e., the record high inflation in the US.
Recently we have seen that the INR relative to the USD has touched its all-time low of 1 USD = 80.1474 INR.
Why is that?
First, how do you say the INR is strengthening or weakening, what is the reference point or it must be relative to something, right? In this case, our reference point is USD. So generally, we can say that the strengthening & weakening of the INR is not entirely but to some extent dependent on the USD.
Now that we have established that, how exactly does the US inflation affect the INR? Shouldn’t a weakening USD strengthen the INR? Logically yes, but things are not that straightforward. Everything is interlinked causing a domino effect.
Eg. the scenario: Inflation steering up in the US makes the FIIs invested in India nervous & suddenly want to pull their money invested in India back to the US. What impact does this have on the INR?
The FIIs want to convert this massive chunk of INR to USD, causing a surge of INR supply in the markets & decreasing the supply of USD. Therefore, based on demand & supply, this appreciates the value of USD against the INR, i.e., the INR just weakened.
- Appreciation & depreciation in the price of any asset, product, etc. is directly or indirectly dependent on the demand & supply concept.
- I want you to know that the depreciation of INR against the USD is healthy if it is taking place scientifically, which it is.
How does this devaluation of INR affect you & how can you tackle this effect?
Everything is interconnected & this INR devaluation directly or indirectly affects you.
Eg. Consider the oil prices. Today post the Industrial revolution, almost every aspect of our lives involves oil.
India imports oil on a massive scale to meet its needs in India. Therefore, we purchase an already expensive oil with a depreciated INR. These extra expenses are passed down the chain, ultimately ending with you, i.e., You pay more for the oil too.
How do you tackle these unplanned rate hikes?
The answer is simple: you acquire professionals to do the job for you.
Why? Economics & Finance are complicated subjects & to counter the unforeseen effects on your finances, professional help & planning are necessary.
Here at GoChanakya, we provide exactly that. A professional & competent approach to your Finances is at your fingertips. Use it wisely and secure your future.