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Why Rupee is falling against US dollar?

Discussion in 'Technical Analysis' started by nirajshah, Jul 16, 2022.

  1. nirajshah

    nirajshah Champion

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    Hi @shabbir

    I am not sure, but when the Indian economy is doing better than the US, why is the USD showing strength?

    The US has fear of recession, and India has growth, but we see the rupee making a new low on a daily basis. Isn't it weird?

    Can you comment
     
    nirajshah, Jul 16, 2022
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  2. emailsaravanans

    emailsaravanans Active Member

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    Waiting for shabbir comment but below is my opinion:

    I don't think Indian economy is doing better. Indian stock market is falling since FII started selling. India also has same inflation problem as US (already RBI increased the interest rate once and will continue to do). India is losing dollars reserve due to FII selling (rupee is depreciating). Indian stock market will further go down as FII sells more. FII will continue to sell as long as FED is increasing the interest rate. US FED promised to increase the interest rate in upcoming meetings (to control the inflation). As you said US has fear of recession, that is already started impacting the IT sector (IT stocks and layoffs) overall. So, as and when there is action is US, you will see reaction in India too. Need to wait and watch.

    What are the parameters we consider to say Indian economy is doing better? Is it because Indian stock market has fallen less compared to the US market? I am not sure if that is the right criteria.

    What other parameters to consider India is doing better?

    At the same time it is the right time to invest in Indian market since it will revive in the future. The same situation will not continue for a long time. Next 6-12 months is a great buying opportunity. As an investor we should see the current situation as opportunity.

    Shabbir has already explained on this here: https://shabbir.in/buy-june-2022-fall/
     
    Last edited: Jul 17, 2022
    emailsaravanans, Jul 17, 2022
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  3. shabbir

    shabbir Administrator Staff Member

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    I completely agree on this view but India is doing relatively well as compared to the US. India will still have growth whereas the US is expected to have recession.

    However, USDINR is somewhat related to the flow of money and not directly reflection of economy as a whole.

    Indian economy doing well and so money should flow to India and so rupee will show strength. Similarly the US economy doing well and the money should flow to the US.

    However, the elephant in the room is quantitative tightening or QT. The USD is flowing into the US because though the economy is not doing well but there is QT as well as the raise of interest rates in the US. I explained it in the above article.

    So don't worry too much if you still see rupee making new low daily and it is because USD is moving out of India. Relatively India is better but we are in a global village.
     
    shabbir, Jul 17, 2022
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