Rupee Vs Dollar: Here's How Falling Rupee Impacts You Rupee has been depreciating against dollar and is bound to impact you if you are planning education abroad

Indian Rupee (INR) opened lower by 8 paisa at 71.36 against the US Dollar on Monday. This is rupee's lowest fall in the last three weeks and since January INR has fallen by nearly 2.36 per cent.

Explaining the reasons for this fall, Dilip Parmar, Research Analyst, HDFC Securities says "The central bank has been aggressively buying the dollar on one hand, but is going short on the market side. This short position has led to rupee depreciating in the last few days." He adds that in the coming 2-3 days rupee may depreciate slightly but is unlikely to cross the 72 mark.

That said, looking at the past data, INR has constantly depreciated against dollar in the long term.

Here is how fall in rupee impacts you and how you should hedge against it in the long term.

Invest overseas

While the impact of weakening rupee may not impact your day to day expenses significantly, it is a cause of concern for students studying abroad or planning to go outside India for their higher studies.

An Indian student spends an average $47,000 in a year in the US on tuition and accommodation. In Nov 2017 when the rupee was around 65.18 against dollar, this would have cost the student around INR 30 lakh. At today's rate, the same would cost the student INR 3.34 lakh more.

Financial planners suggest that investors who have an overseas expenditure lined up in the future should start taking exposure in US focused funds. "The dollar exposure will hedge against the domestic currency depreciation in the long term," says Rohit Shah, founder and CEO, Getting Your Rich.

Mutual fund investment companies let investors invest in US equity under the category of funds-of-funds. Feeder funds are an alternative option that the investors can opt for. Shah explains that feeder funds are India-based funds that invest the investor's money in an international fund. "For instance, Franklin India Feeder Fund will take money from the investor in INR and invest it in the Franklin US Opportunity Fund. When the investor wants to redeem his investment, it will be redeemed in USD and transferred to India in the prevailing INR rate," he says.

Take note that exposure to such funds should be a function of overall asset allocation. In the absence of a specific goal, an investor can allocate 5-33 per cent depending on his risk profile. "For a child's foreign higher education goal, the parent should try to invest the maximum permissible amount in global funds," says Shah.

Apart from inflation, the investor should consider further rupee depreciation while estimating the corpus he will need for the goal.