The Reason why Rupee is falling against Dollar
The Indian rupee is known to be the worst performing currency in the South Asia region. Continuing its worst performance it fell to its all time historic low level of 69 rupees against 1 US dollar few days back and again today. Why is rupee falling against dollar? The fundamental reason is its demand and supply vis-à-vis US dollar’s demand and supply in the international market. We have to understand that just like any other commodity, whose price is determined by its demand and supply condition in the market, Indian currency rupee is also just another commodity, and so its price i.e., its purchasing power is also determined by its demand and supply. The supply of rupee is solely determined by the Indian central bank RBI, which has monopoly over its supply. The demand comes from the people (both Indian and foreign). In the market when the supply of rupee increases, when its demand and US dollar’s supply and demand are unchanged, then that results into rupee’s ...