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Here's A Look At The Rupee's Spectacular Decline In The Last Year

Mamta Badkar — Fri, 25 May 2012 17:59:16 -0400

The Indian rupee has had a dismal run, and its weakness is hurting Indian consumers and an economy that has already been in decline.

Earlier this week the dollar was at INR55, a record low. The rupee deteriorated even further to INR56.37 before finally making some gains. Earlier this month the central bank asked Indian exporters to convert 50 percent of their forex holdings into rupees to support the currency.

But SocGen analyst Wee-Khoon Chong says the Reserve Bank of India's (RBIs) moves have not been enough to stem depreciation and there are still fundamental risks to the rupee:

"One of the major issues with India is the current stance of macro policies which have raised concerns among investors. On the monetary policy side, the recent policy move was misguided, in our view. Meanwhile, on the fiscal side, there is a significant risk of spending slippages.

On the growth front, investors have grown increasingly concerned about the sustainability of the growth performance in light of what is happening in China. Finally, the balance of payments remains a source of risks, with India heavily dependent upon private capital flows to cover its large current account deficit. The external financing constraint is all the more challenging that the global risk sentiment picture is currently not supportive of risky assets."

Here's a chart that shows the dollars gains against the rupee since May 2011:




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Here's A Look At The Rupee's Spectacular Decline In The Last Year

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