The rupee dollar exchange rate has crashed to the threshold figure of 72 and it was expected..The transition from 69 to 72 is so fast for various reasons..The dollar was not only strong but was expected to be strong on the back of clear inflation and interest differentials between the U S and India.given the tight money conditions and expectation of enhanced dollar strength, the exit of portfolia capital was swift and tha outflow of capital accelerated the tendency towards depreciation.
Since RBI knew full well that given the overvaluation of rupee its fall was certain in an atmosphere of dollar strength and it did not opt for any aggressive intervention.The very fact that RBI kept quiet and said the market will find its own level was the pointer that the rupee fall will not be followed by any intervention..It implicitly meant talking down of rupee,though.
It is learnt that a separate window has been opened for meeting the dollar demand for oil imports and that will not directly add to the dollar demand in the market.All said and done heavy imports and sluggish exports do not give much hope that an even balance between demand for foreign exchange and supply can be achieved...
High reserves give strength to beat speculation but the way in which the rupee is molested while other emerging markets are fighting causes concern..rising oil price and falling rupee are the double edged weapon tearing the macroeconomic fabric of the nation..
Let us hope that the rupee will stabilize soon
Since RBI knew full well that given the overvaluation of rupee its fall was certain in an atmosphere of dollar strength and it did not opt for any aggressive intervention.The very fact that RBI kept quiet and said the market will find its own level was the pointer that the rupee fall will not be followed by any intervention..It implicitly meant talking down of rupee,though.
It is learnt that a separate window has been opened for meeting the dollar demand for oil imports and that will not directly add to the dollar demand in the market.All said and done heavy imports and sluggish exports do not give much hope that an even balance between demand for foreign exchange and supply can be achieved...
High reserves give strength to beat speculation but the way in which the rupee is molested while other emerging markets are fighting causes concern..rising oil price and falling rupee are the double edged weapon tearing the macroeconomic fabric of the nation..
Let us hope that the rupee will stabilize soon
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