Current Affairs- 18 Oct.2022
Strengthening dollar
Current Affairs- 18 Oct.2022
The rupee’s weakening exchange rate and the paceat which India’s foreign exchange reserves are dwindling are back in focus. The Ukraine crisis and the U.S. Federal Reserve’s aggressive monetary tightening have led the rupee to depreciate the past the 82 per dollar mark, while India’s reserves have shrunk to a two-year low.
Reserve include foreign currency assets, gold, special drawing rights with the International Monetary Fund, and reserve tranche position. These external assets, controlled by the monetary authority, are used to absorb shocks during times of crises; provide confidence to the market that external obligations can be met; and build capacity for intervention in foreign exchange markets.
Forex reserves are a crucial indicator of a country’s economic health and its import capacity. As per a Bloomberg report, dwindling forex reserves have led to a shortage of dollars in many import-reliant economies. As a result, countries that are dependent on overseas food purchases are finding it hard to pay for commodities such as rice and wheat.