Currency Trading #8 Why Crude oil prices matter?
News reporter: The prices of Petrol and Diesel have been revised for the 2nd time this month All of us take pride on the fact that India is the fastest growing economy in the world Next to China, kindly note that This kind of growth comes at a cost Motorists have been increasing in numbers and it is set to to increase the consumption of Petrol and diesel many fold Obviously Indians spend a lot of money for this Government collects a huge sum in the form of taxes Every time there is a rise in crude oil price, value of Indian Rupee decreases Why? Trade imbalance and Trade surplus Before talking about that Crude oil cannot be with Indian currency..
Indian Rupee needs to be converted to US dollars United States managed to implement this system with their dominance INR gets converted to USD and then a barrel of crude oil is brought By the time it reaches a consumer, price seems ugly Trade surplus: When you export a thing for 100 and import a thing for 80, it’s trade surplus In such a scenario, INR stays within the country and it can be spent for other purposes But as of now, the situation is rather different Trade Deficit: We are exporting goods worth 100 INR and importing goods (Crude Oil) worth 200 INR With this, I am spending more money to procure goods That’s essentially like a Loan/Mortgage Investors gradually lose interest on this currency Is this good or bad for the economy?
The answer is a yes and a no! It is important to keep a note of the monthly reports of the trade surplus/trade deficit of nations Essentially, compare these four countries and their trade export/import data with India You will have an idea and you will be able to predict Whether INR would appreciate/ depreciate with respect to events I have told you earlier This is a big ocean, all you need to do is Wait and catch the fish you want All the factors will serve as a earthworm to catch that fish (Money) Be careful with your trades, You will get ready to trade on your own shortly Thank you