Studying Abroad Becomes Expensive As Dollar Turns Costly

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It's a bad time of the year for the rupee to fall against the dollar, especially for students who are making travel plans to study abroad or for payment of fees to universities abroad.

Studying Abroad Becomes Expensive As Dollar Turns Costly
In fact, the rupee has now dipped from levels of Rs 62.24, exactly a month back on April 13, to the current levels of Rs 64.15 to the dollar on May 13.

Let's understand the implications of the same

Now, if you were travelling exactly a month back and wanted to convert Rs 5 lakhs for your tuition fees and personal expenditure for your college, you would get approximately Dollars 8033.

Now let's say you convert the same Rs 5 lakhs at the current rate of 64.15 you get Dollars 7794.

In a months time you are getting Dollars 250 less, or almost Rs 16,000 less towards depreciation of the currency.

Now, understand that the rates we have given is just the rates in the interbank currency markets. When you go to buy dollars or travellers cheque at an authorised foreign exchange currency dealer, you have to pay more.

For example, today Thomas Cook is quoting 64.85 to the dollar.

Is further currency loss a possibility for students?

The one question that travellers, including students going abroad often ask is: Will the rupee fall even more against the dollar? It's difficult to see the dollar getting more expensive vis-a-vis the rupee.

It all depends on what happens in the interbank forex markets where trading happens between the rupee and the dollar.

Let's get into the economic aspects of it, though it might be a little difficult to understand for those who are not in tune with economic aspects.

The dollar can get expensive against the rupee, which means you may have to pay more to buy one dollar, if international or domestic events turn ugly.

For example, if Greece defaults in its payments to international debtors, there could be a stock market sell-off across the globe, including India leading to heavy demand for dollars, pushing the rupee even further down.

Secondly, if the US Federal Reserve hikes interest rates in the US, there could be an exodus of funds from Foreign portfolio Investors in Indian stock markets leading to demand for dollars and hence the rupee falling.

When there is heavy volatility, or the rupee is falling sharply, the Reserve Bank of India tends to sell dollars to calm the markets.

Remember, the country's central bank has huge currency reserves. If the RBI feels that 65 level is a good level for the currency against the dollar, it might might sell and buy dollars accordingly to keep it steady.

The RBI does not intervene everyday, but only when there is volatility and when the rupee has moved sharply lower or higher.

Check rupee rates against a basket of currencies here

Movement of rupee against dollar in the last few months


 Rate Month
61.94 Jan 13, 2015
62.07 Feb 13, 2015
63.08 March 13, 2015
62.24 April 13, 2015
64.15 May 13, 2015

Conclusion

Students travelling abroad need not really worry about a further sharp fall in the rupee against the dollar from the current levels. The rupee has already fallen significantly in the last one month and a further fall from the current levels is ruled out.

It could in all probability stay steady in the 63-64 range for the next few months.

GoodReturns.in

Read more about: dollar, student, education
Story first published: Wednesday, May 13, 2015, 11:11 [IST]
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