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Charts & Analysis

The Dollar Hits 63. Nobody Knows Why.

The Rupee is now 63.13 to a dollar, and at this point everyone has a good reason but no one really knows why. You’ll hear the standard stuff like oh, we have a current account deficit. Or that FIIs are exiting because the situation is bad. Or that the economy is slowing. Or the more interesting things like the government is letting the dollar slide so that politicians can bring back their black money stashed abroad for more rupees.

But you can’t get away from this, and this is happening right now.

Rupee Dollar Hits 63

(The last quote is from FX-Clear at CCIL. The RBI ref rate is lower, but the CCIL rate indicates the real market)

Impact: High inflation as our imports get expensive. Fuel prices will go up. Exporters should benefit. Companies that have borrowed from abroad are sinking their heads in the sand.

The Real Reason: I think it involves horrible policy making for the last five years. But I don’t really know.

  • achin says:

    63.2329 ..

  • Karl says:

    The most important reason for dollar strength is worldwide deleveraging. As debt’s (which are globally denominated in dollars) get written off the supply off existing dollars diminish hence the higher $ price. From 1971 (when Nixon broke the link to gold) to 2008 the growth in U.S GDP was always less than growth in total U.S debt. Now even at these ultra low interest rates, the debts cannot be repaid and the debt capacity has reached saturation. All these QE programs did was postpone the inevitable and created horrible asset bubbles in food and fuel. The U.S interest rates are rising not because of any inherent strength in the U.S economy but because of the increased risk perception. In this worldwide currency beauty contest, the US dollar wins because it is the least ugly of all currencies.

    • Leo says:

      KARL excellent logic /
      asset bubbles the core burst last this time the west had it.US Ratesa rea about ot blow up on upside and ben has his tushi team wont be able to do anything but just blink
      can u imagine 8% rates on US 10 year. i can coz i saw this coming …i am a cycles person and i know it will happen.
      There is no strength in US economy .That is where ur wrong totally.US citizens are so god damn poor they have no gold we are loaded with gold and our currency is down coz of stupidity of our politicians..We can live with high inflation but can the west afford to do that they cant .In india we will provide food in temples also if we are poor .But will u i doubt it .We have a billion problems but still we thrive and have gold more than the western world.
      USD will win short term but it is the last hurrah.NIkkie is an example.It went up no one knew what was happening in 1985 to 1989. It will crash and burn .That time ASIA will take charge.U better learn HINDI or chinese mandrin man coz west is going down for next 60 years .

  • KC says:

    Conspiracy Thoery: delibrate shorting of Re. So that India govt ban any further sale of gold/silver. Zerohedge and others mention that west is facing huge challenges with physical gold and is doing all to contain the spread of the word.
    Hence, attack supply of gold from india.

    • Leo says:

      This could be true actially
      coz india buys china buys … so to reduce physical demand they are putting pressure on chidambaram to do something .
      Why dont they say oil imports are killing why gold.
      though the end game of central banks have begun .The rigging of buying back bonds …their days are numbered .

    • Karl says:

      The US does not need to make any effort to destroy the rupee. The government itself is assisting in the rupee’s suicide. Imagine the kind of money printing that will be required to finance the food security bill and other welfare projects in this age of Sonianomics. This will lead to further currency debasement. While the US may have some hand in the rupee’s slide, the ultimate fault is at our doorstep.