On March 23, the dollar-rupee exchange rate breached the Rs 76 mark. Many say that the rupee could devalue beyond Rs 80 per dollar by the end of April. However, there is no need to push a panic button already. We have approx $481 billion dollars in reserves. RBI could use this to stabilize offset the fall by buying more rupees.
The rupee’s fall became steep in mid-March, after developed countries cut their respective interest rates. The US Federal Reserve brought it to almost zero. And the Bank of England brought it to 0.1 per cent. This phenomena of falling currency is observed in most emerging economies like Brazil, Argentina, South Africa, Indonesia and even in Singapore. We have highlighted recent RBI stimulus package analysis here.
Further reading – US Cuts its interest rates to near zero.