Giving up all the gains in the early trade session on Tuesday, Aug 14 morning, the Indian rupee plummeted to an all-time low of Rs 70 per dollar. The recent fall in the currency market is attributed to the Turkish economic crisis.
Turkish currency Lira plunged nearly one-fifth against the dollar last week. But even before the current crisis, Lira was the worst performing currency in the entire world, falling by almost 50 per cent against the dollar in the last 12 months.
The fall in the Turkish currency is a repercussion to the country's high current account deficit combined with high level of debt in the private as well as private sector. Additionally, there is significant foreign funding for the Turkish banking system. The government has borrowed the foreign currency to a dangerously high level.
The Economic crisis in Turkey has sent ripples across the globe due to the exposure of the foreign financial institutions in the country are banking system.
However, the fall of the Indian currency at the start of the week to a record low level against the dollar-pegged dirham has triggered a sudden hike in remittances from the UAE and other Gulf countries. Some of the exchange houses have even reported a rise of 25 per cent in volumes and are bracing themselves against a sudden deluge on the rise of remittances back to India.
It is to be noted that the remittances to India in the past few months have been on the higher side due to the volatility in the Indian currency market which expected to rise even further. Remitters to India are catching this opportunity to send their money back to India to get more value for their money.
According to the World Bank, the UAE, along with other Gulf Cooperation Council (GCC) countries with dollar-pegged currencies, have been a major source market for inward remittances to India, which stood at $69 billion in 2017.
The huge volatility in the currency market has also sent shock waves in the equity markets across the world. Bombay Stock Exchange where bulls had overtaken in last 10 trading session witnessed a plunge in the stock market prices.
