Rupee has touched the 70 mark vs the dollar, for the very first time in August 2018. In 2013 India was seen as part of the ‘Fragile Five’ Economies: Brazil, South Africa, Indonesia, Turkey and India. Circa 2018, Turkey has gone very fragile of later and their currency has plummeted against the dollar.
What are the risks the Rupee Faces?
- Oil prices which has impacted the ₹ valuation.
- Foreign Institutional Investors have taken out some dollars by selling off stocks and bonds (more of the latter).
- We are in an election year the political uncertainty could spook foreign and domestic investors.
- Global interest rates might go up.
- President Trump may engage in a trade war with China, or other moves which could increase uncertainty.
What will hold the Rupee?
Even after the above, the ₹ is still somewhat over valued when compared to other emerging markets.
- India’s current account deficit (CAD) and forex reserves are in a much better shape than 2013.
- Prime Minister Modi has kept domestic oil prices high (perhaps for a rainy day which is fast arriving; that too during monsoons).
- India’s interest rates too are higher than in 2013 with inflation under control.
The rupee trajectory is being managed well and India is positioned to tide over any upcoming crisis in the global markets.
