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Charts & Analysis

Chart: The Rupee Goes Beyond Rs. 56 a Dollar

The USD-INR spot rate has just crossed a barrier – Rs. 56 to a dollar. This is the highest the dollar has been since July 2012 and just Rs. 1 short of the all time high.

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A rising dollar will stoke inflation. A move above 57 will cause further jitters for corporates that have foreign loans to repay and many of them have just renewed loans for a couple years. Worse, this means gold imports continue unabated even as the metal loses value internationally – since the falling dollar is likely to be the effect of a widening trade deficit.

  • IsItPossible says:

    Wait for rupee to cross 60…. a “bold” prediction!!!
    Not so much, with the way things are moving, it is very likely that rupee will hit all time high to 65 in a year or two, WHY?
    Just few pointers to think about:
    1. India’s GDP is half and suggests significant slowdown ahead
    2. Too many scandals in Government, lack of WILL for good policies and high corruption
    3. 2014 – year of uncertainty as a coalition government will ruin pretty much everything
    4. Add Global worries starting with Euro debt problems, China slowing down, Except US, all developed countries are experiencing recessionary pressure
    5. If and when it happens – housing bubble burst in major Indian cities will certainly take its toll on economy and more importantly middle class

  • Sanjeev B says:

    There are good reasons why the rupee should be depreciating 20% quite rapidly. If the union government is to choose between an investment-friendly low interest rate policy, or pumping money and notional purchasing power into the domestic economy, it’s obvious which way they’ll go in an election year.
    Property prices will stagnate even as the rupee loses value; that’s the only way the property bubble is going to deflate. This time around there may not be the growth optimism that allows export-oriented workforces to pledge 30 years of their savings stream into a single real estate deal.
    In this scenario, stock prices too will stagnate or fall, giving a significant negative return.
    Most other products and services will go up 20% (especially fuel and food).
    I expect the rupee to slide to 69 by May 2014 after the election hot air has cooled off, and recover a bit to 65 or so by Oct 2014 with the general festival season euphoria. … This assumes the US economy does not have a domestic or a euro crisis on their hands before then.