The rupee weakened on the news that China devalued its yuan by about 2 percent.
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The move strengthened the dollar value, which has negatively impacted major world currencies including the Indian rupee. “However, the rupee made a wholesome come again and ended decrease than the earlier shut”, Hiren Sharma, senior vice president, foreign money advisory at Anand Rathi Financial Services informed IANS.
The dollar extended losses against the other major currencies.
That apart, hopefully, this time will be different from 2013, when the Indian rupee was targeted by speculators in what is known as the Non Deliverable Forward or NDF market overseas – which forced RBI to squeeze liquidity and tighten short-term rates. Importers have to be wary of these movements and will find it hard to take a call on hedging their exposures given the length of this volatile period.
The rupee has fallen over 3 per cent since China on August 11 depreciated its yuan, sparking fears of a global currency war.
Stock markets plunged almost 6%, the biggest falls since January 2009 after a sell-off in Shanghai for the second week extended global market losses of more than 10% from the recent highs. Nothing seems to work in these free market economies.
The try can also be view as a measure to nook the worldwide export markets from different rising buying and selling powers resembling India and the Asean (Association of Southeast Asian Nations) grouping.
“Sharp sell offs were triggered on worries over subdued corporate earnings, sell off by FPIs and profit booking dampened the sentiments”, Mahnot added.
There is no clear indication of where exactly the rupee will gain upward lift, or how investor confidence will be restored in India’s currency.
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“Extended slide in oil prices has cast doubts on the chances of US Fed’s rate hike”. “And rate cuts are a natural outcome that the RBI has no hesitancy in delivering”. “And then they will find that India is actually in a very good spot, it’s in a rather sweet spot, given the fact that all of our parameters, the macro parameters are all well”. While the downward spiral of rupee is worrying investors and led the Finance Minister Arun Jaitley to deliver a statement and assuage their concerns, a comparison with other emerging economies shows that relatively, it has been far more stable and robust as a currency against counterparts such as Brazil and Russian Federation.
