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Rupee slumps from Rs 73.21 to Rs 77.62 against dollar

Here’s how your personal finance will be impacted when Rupee weakens against Dollar.

The Indian Rupee is weakening against the US dollar and has slumped to nearly Rs 77.62 levels from the levels of Rs 73.21 a year back, which means, a fall of about 6 per cent. Precisely speaking, the dollar has gained by 6 per cent against the Rupee over the last 1 year. Since January, INR has weakened against the dollar by 4 per cent and may carry on to show weakness especially if the US Fed hikes interest rate more than what is expected in 2022.

 

In simple terms,if in 2017 you had to spend Rs 64 to buy a dollar but now you need Rs 77, thus reflecting a weaker INR. This also shows that INR depreciated by almost 3.75 per cent on an annualised basis against the dollar.

 

An indirect impact is on some goods becoming expensive therefore leading to inflation. When INR weakens, imported goods become costly and as India is a major oil importer, there is a widespread impact on other goods as well. Rising inflation is also partly because of falling INR. Even imported components used in consumer goods witness an increase thus pushing the cost of goods higher.

 

Borrowing cost will also increase. When inflation increases, RBI using its tools like repo rate and tries to tame inflation. With hike in repo rate, interest rate rises leading to higher borrowing cost. Both businesses as well as retail borrowers get to incur higher borrowing costs and higher EMI than before.

 

Foreign education will get expensive. Students who are undergoing foregn education should ideally keep dollars in foregn bank account to hedge against falling INR.

 

International holiday will also become more expensive. When you exchange INR to buy dollars either through banks, credit cards etc, a higher outflow of Rupee will be there if the dollar has attained strength.