WHY INR IS WEAK AGAINST GBP & USD

INR VS USD / GBP

The INR was weaker against the GBP/ USD on Monday and was close to reaching its lowest level in seven weeks against the US Dollar as concerns over rising oil prices due to Iraq fresh violence by ISIS and increased demand for Dollars weighed.
The fighting in Iraq sent oil prices gradually pick up to higher level last week which in turn increased concerns that the higher cost of the crude oil would have a negative impact upon India’s trade deficit and have a knock on effect upon inflation. This is  unfavorable time as the price of oil increase, the exchange value increase due to import and 2nd highest population nation demand for oil also increase leads to massive pressure to control in stable rupee value against GBP and USD. As India imports around 80% of its oil any rise in prices has a negative effect upon the nation’s trade deficit data.

  “The currency is likely to be volatile given the concerns over uncontrolled emerging out of Iraq. The Rupee is likely to be under pressure given that India is a net importer of oil,” said the co-head of currency and strategy at Edelweiss Financial Services Ltd. As the financial year comes to a close the Indian Rupee was also weakened by an increased demand for US Dollars from Indian importers.   Ending a two-day falling trend, the rupee on Tuesday recovered by seven paisa to close at 60.13 against the US dollar on the back of a sharp rise in local equities following a drop in global crude oil prices. Concerns over the current macroeconomic situation after recent spike in global crude oil arose due to Iraq’s crisis, lessened as crude prices dropped giving some relief. This led to sharp rise in domestic equities, giving respite to the investor fraternity and also helped the rupee recovery. At the Inter bank Foreign Exchange (Forex) market, the local currency commenced higher at 60.13 a dollar from last close of 60.20. It was trapped in a narrow breadth of 60.07 and 60.18 before concluding at its opening level of 60.13, a net rise of seven paisa or 0.12 per cent.

 REASONS FOR WEAK VALUE  OF (INR) INDIAN RUPEE

 1. It is because of large scale pulling out of investments by Foreign Institutional Investment.  

2. Short selling of shares by the FII in the spot as well as future market since effect of inflation throughout the world, especially in USA.  

3. Due to excessive demand of US Dollar.

4. Excess import of available materials in India over less export as compare to import.  

5. Indian using foreign company products and service where Indian product and service available but souring.  

6. Vanishing of Indian currency in black money and corruption, where records unavailable.  

7. Circulation of duplicate notes of Rs. 1000 and Rs. 500 also played a vital role falling of Rupee value.

8. Many Indian MNC’s are earning high profit due to higher exchange rate or weak Rupee value, as they get more profit from weak Rupee value.  

9. Valuation of liquid gold i.e petrol by middle east in terms of Dollar and not in terms of Rupees, hence the demand for US dollar goes higher day by day.  

10. Excessive corruption in defence product purchase also lead unexpected loss of money to foriegn arms company. India should developed its own weapon and discover more research like DRDO. 

11. Losing of Indian skilled labour and HRD to foriegn nation, India need skilled labour and HRD to develop building towards positive growth.  

For more details click the link: https://www.youtube.com/watch?v=GW7wu3uyz9g