eli5 :Why did the rupee kept falling against dollar from 2007-09 despite the American recession and India’s growth in GDP?
In: 0
During the Great Recession, the foreign direct investment in India reversed course, as the large economies of the world were in recession. The 2008 financial crisis was not just an American event, as almost all of the European economies also contracted as a result. While India’s GDP continued to grow, the foreign direct investment dried up, leading to less demand for rupees overall. The dollar in the meantime experienced strong demand as large institutional investors jumped from high risk assets into the safety of US treasury bonds. This supply/demand reshuffling is what contributed to the lower value of the rupee relative to the US dollar during the Great recession.
Latest Answers