Our local currency is Indian Rupee INR, Indian government spend large amount of foreign exchange in importing crude oil from oil exporting countries like Iran. If the cost of USD is high then crude import cost also rise, pressuring oil marketing companies to hike fuel prices. As we all know if fuel prices were hiked, inflation becomes the problem.
How high inflation is problem:
Rising inflation has to be controlled by interest rates hike, this results in slowdown in manufacturing industries hence affecting entire manufacturing sector. This results in major selling in nifty future; slowdown not only changes the market trend but also dissolves confidence in policy making. Nifty future is badly affected by the currency movement, especially when US dollar gains strength across other currencies. Even European debt crisis is responsible for this currency war. There has been series of downgrades in euro zone economies and further warning is give with more possible downgrades.
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