While a falling currency is likely to continue making headlines, it is not out of line with the global trend. Several other emerging market and even developed market currencies have fallen more than the rupee so far this year against the dollar
(Image: Photographer: Brent Lewin/Bloomberg)
The rupee, which has been falling to record lows session after session, is hovering on the key psychological level of 80 to a dollar.
While it is true that a falling currency worsens the imported inflation and can eventually hurt other macroeconomic fundamentals, the rupee has actually been very well-behaved so far.
Consider this: Several other emerging market and even developed market currencies have fallen more than the rupee so far this year. This implies that while the rupee has lost its value against the greenback, it has actually gained against these currencies.
The rupee continues to stay in the middle of the EM pack, with its performance against the dollar lagging behind its peers from Indonesia and Malaysia but ahead of its South African counterpart.
Moreover, the rupee’s fall right now corrects its relative overpricing against a wide basket of currencies, which is also something to be happy about.
So, while the falling rupee could pinch your pocket somewhat, remember that this is part of a global trend when the surge in crude oil and commodities has pushed up inflation, even as a run for safety pushes up the dollar.
Also read: The good, the bad and the ugly: Where will the rupee end up?
In India, the central bank and the government have come out with a raft of measures to ensure that the currency movement is not volatile.
Trust them to follow up with more as and when required.
