India-Russia: Dollar is not needed anymore..?
Unexpectedly, the indian rupee against the US dollar has fallen to a new all-time high of 79.63 rupees in early morning trading ahead of june inflation data. While all countries from india to the US are determined to raise interest rates to control inflation, the world will soon announce the next rate hike. Meanwhile, the reserve bank of india has released an important announcement. The reserve bank of india on monday announced the rupee settlement system for international trade to promote the growth of global trade with emphasis on exports and to support trade in the indian currency.
Under this new system, exporters and importers will be able to make receipts and payments in rupees using a special Vostro account. With this new trade system, india can trade with russia in rupees. With this new special Vostro account structure, all goods purchased by india from russia can be paid in indian rupees instead of dollars and euros. Similarly, foreign countries that allow this structure can buy goods in indian rupees instead of dollars. The indian Rupee is under tremendous pressure this year due to a massive outflow of money from India. It is down 6.7% from around 74 against the US dollar at the start of 2022. It fell to a record low of Rs 79.63 in the morning trade.The indian rupee is not the only currency badly affected by the uncertain global economy and US policy actions. The Japanese yen, Polish zloty, Chilean peso, and Thai baht have also been adversely affected. India has developed hyperinflation in its economy after the Russia-Ukraine war. At the same time, the united states misjudged inflationary pressures on its economy as "intermediate" and caused the world's inflation to suffer more. Along with the war in Ukraine, the US took drastic measures to control its inflation. While the US market has benefited from this move, all countries that rely on the dollar for trade are facing further declines. This was due to wrong policy forecasting by the US. Even as the reserve bank of india and the central government took necessary measures, the rupee crossed 77 in May, 78 in june, and 79 in July for the first time.The rupee touched a record low of 79.49 against the dollar on monday and fell to 79.63 on Tuesday. The brutal decline of the rupee is likely to continue due to the poor stance of the Federal Reserve. But this week, the rupee has crossed 80 against the dollar.