Indian rupee has touched an all time low ..71 per the USD..Since January 2018 it has fallen almost 10%..Thus retaining. its status as the worst performing currency this year ..It is not just rupee that has fallen and almost all the emerging market currencies have got the beating against the the US dollar
.The reasons are not far to seek .current account deficits in these countries has been widening for quite some time..The rise in international oil price is one of the principal factors pushing up the import cost and causing strain on current account .Despite the fact that the keralites have sent a massive amount for the repair and rehabilitation of the flood affected home ,the remittances BOP continues to be in trouble..
In the sluggish world economy, dominated and frustrated by Trump's trade war exports have suffered ..with little net capital inflow and rising dollar requirements for oil imports the pressure is on rupee. Furthermore, the tight monetary conditions and expectations of higher interest rate in the US has made dollar stronger.The dollar index which measures the value of dollar against the host of major currencies has registered a rise of nearly 8% since Feb this year..
so the underlying reasons for the fall and fall of rupee is partly domestic, our widening current account deficits and also due to the exogenous factor namely the strength of dollar on the back of tightening of monetary policy in the U S..In August alone it fell by 3 percent plus.
Going by the estimates of experts in the field the rupee is undervalued even at 71 and hence RBI is not feverish or panicky to arrest the slide if it happens by market forces..But it is keen to contain the volatility..RBI will be active in case the rupee shows the tendency to cross 72 the upper ceiling as it is perceived to be the danger mark for more intervention..
Thus far there is implicit talking down of rupee and the tune will change as it still slides further.The secular depreciation of rupee is not a surprise to the author the blog writer ..The worrisome fact is that it will escalate the cost of imports, engender inflation and may not help much on export front as other currencies of emerging markets have fallen .at best it can help maintain the competitiveness And that is the only situation in the hopeless situation...
.The reasons are not far to seek .current account deficits in these countries has been widening for quite some time..The rise in international oil price is one of the principal factors pushing up the import cost and causing strain on current account .Despite the fact that the keralites have sent a massive amount for the repair and rehabilitation of the flood affected home ,the remittances BOP continues to be in trouble..
In the sluggish world economy, dominated and frustrated by Trump's trade war exports have suffered ..with little net capital inflow and rising dollar requirements for oil imports the pressure is on rupee. Furthermore, the tight monetary conditions and expectations of higher interest rate in the US has made dollar stronger.The dollar index which measures the value of dollar against the host of major currencies has registered a rise of nearly 8% since Feb this year..
so the underlying reasons for the fall and fall of rupee is partly domestic, our widening current account deficits and also due to the exogenous factor namely the strength of dollar on the back of tightening of monetary policy in the U S..In August alone it fell by 3 percent plus.
Going by the estimates of experts in the field the rupee is undervalued even at 71 and hence RBI is not feverish or panicky to arrest the slide if it happens by market forces..But it is keen to contain the volatility..RBI will be active in case the rupee shows the tendency to cross 72 the upper ceiling as it is perceived to be the danger mark for more intervention..
Thus far there is implicit talking down of rupee and the tune will change as it still slides further.The secular depreciation of rupee is not a surprise to the author the blog writer ..The worrisome fact is that it will escalate the cost of imports, engender inflation and may not help much on export front as other currencies of emerging markets have fallen .at best it can help maintain the competitiveness And that is the only situation in the hopeless situation...
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