Indian Rupee (INR) beaten down by the U.S Dollar

The Rupee costs fewer Dollars now. You get 2 Rupees more than what you could in October this year. A more precise history can be found on Yahoo finance. I’m not entirely sure why. Indian exports are on the up (although not as much as one would like). One article claims that this maybe directly attributed to rising U.S interest rates implying that the Dollar would become dearer as lending becomes harder. Anyhow, I doubt if the interest rates in the U.S will stop rising altogether. I am convinced they won’t fall in the near future.

Here is an article written way back in October warning of an imminent fall in the Rupee. Some of the significant points from that article:

  • India’s merchandise trade deficit is growing.
  • The current deficit will also tend to grow despite growth in Software exports and remittances from Abroad.
  • The economy has been growing at a better than expected 8.1%.
  • Rising energy prices will also negatively impact the Rupee.
  • The Reserve Bank of India (RBI) meets on October 25th (a date in the past), and will possibly raise interest rates.

Some digging around on reveals that the RBI did in fact make a statement today on the Rupee’s continued Fall. To summarise, the RBI

  • has no preset target on the value of the Rupee
  • are happy if the value of the Rupee reflects the market fundamentals.
  • won’t step in to correct the fall.

At this point it isn’t too difficult to conclude that the Rupee is going to continue to move in a downward direction as the U.S will attempt to fortify their own economy.