Rupee has lost 9.25 per cent against the US dollar since January 9. As the markets opened today rupee crashed to an all-time low of 69.09 against the dollar.

The slide of the rupee is governed by various internal and international factors. Three prime reasons are:

Crude Oil Prices

For the larger part of the past four years, crude oil prices have remained favourable for rupee but other factors decided its rise and fall. As India depends heavily on imported oil for which it needs to convert rupees to dollars. The simple demand and supply principle weakens the rupee against the dollar.

With crude oil prices hovering in the range of $80 for quite some time now -- up from its lowest rate of $29 in 2016, pressure on rupee is enormous. India imported over 43 lakh barrels of crude oil in 2017 and is likely to cross that mark this year. India is the third largest source of crude oil demand behind the US and China. Both these countries have economies multiple times bigger than India's.

This is happening at a time when the internal twin disruptions caused by demonetisation and GST rollout in one stroke have not given the currency enough time to recover.

Donald Trump's Trade Tactics

US President Donald Trump is tightening the screw on the world economy. He won the US presidentship with the promise of inward-looking economic policy. This means he is targeting both India and China at every possible front.

The recent trade tariff row with India and China is sending jitters across international traders who prefer to stock stable and stronger currency to secure their business interests.

In the latest whimsical decision, the Trump administration has practically forced its allies to stop the import of oil from Iran, a major contributor to the global crude stock. The US also asked India to stop oil import from Iran. Even if India doesn't follow the cue, the Trump administration has virtually set the course for a further hike in oil prices - more demands on the less number of suppliers. Rupee tends to lose sheen with every increase in oil prices.

US Federal Reserve Rate

The US economy has been expanding for the ninth year in a row. This led the recent upward revision of federal reserve rate by 25 basis point, from 1.75 per cent to 2 per cent.

Earlier this month, RBI Governor Urjit Patel had warned that if the US maintains its ongoing monetary withdrawal, it would translate into serious repercussions for the global economy.

Hike in federal reserve rate created a relative shortage of dollar in the market pushing its demand further. With rupee caught in the ripples of oil and demo-GST shocks, the dollar has built more muscles. More rupee is now required to buy a dollar.

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