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Why Rupee is Going Down Against Dollar?

The Indian currency, which is down more than 8% since the beginning of the year, traded at a lifetime low of 69.09 intraday against the U.S. dollar on Thursday. 

However, it isn't the only currency in trouble. Other emerging market currencies have also fallen sharply against the dollar. The MSCI emerging markets currency index, in fact, is down about 6% since April.

Behind this crisis is the U.S. Federal Reserve, which is no longer keen on printing enough dollars to keep interest rates in the U.S. low. Investors, as a result, have decided to pull money out of emerging markets and invest it in the U.S. where they could earn higher yields, thus causing currencies like the rupee to crash. 

Foreign portfolio investors pulled capital worth ₹29,714 crore out of India in May, the highest monthly outflow since November 2016. The increase in global oil prices has not helped either, as traders wanting to buy oil have had to shell out more rupees, thus worsening the current account deficit. All eyes will now be on the Reserve Bank of India, which will hope to prevent a repeat of the taper tantrum of 2013 that sent the rupee crashing.

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