Due to the high dollar value, crude oil prices and increasing global trade tensions, the Indian rupee market is going through a tough time.
Recently, in the wake of a confluence of dollar-supportive events, RBI and its peers in other emerging economies have been forced to defend their currencies.
According to traders, the RBI wasn’t seen actively intervening in the foreign exchange markets as it did on last week.
Value of bonds rose to a new high value of 8.12 percent since Nov. 2014. The rise in crude oil prices worldwide is the primary cause of the inflation concerns.
On Monday, the value of rupee shot up to 72.4450/dollar.
For both rupee and bonds, the rise in oil prices is the main cause of spoilers. India’s two-third crude oil production is sent outside the country and any price fluctuation in the global market whether it’s high or low impacts everything from high dollar demand by importers but also raises inflation concerns back home.
The policy repo rate has been raised by a total of 50 basis points by RBI two successive meetings. And the main goal behind this is to control inflation to 4 percent in the medium term. In a span of one year, consumer inflation rose to 4.17 percent and is expected to pick up momentum on higher crude prices and the weakening rupee.