Almost exactly a year ago we discussed the issues faced by India, as that nation's currency weakened to record lows. We are now back to another round of rupee devaluation. In the last few days the USD/INR exchange rate exceeded the psychologically important level of 60 for the first time in history. Foreign investors are panicking, as capital leaves emerging markets.
USD/INR" width="411" height="308">
Why wouldn't India's central bank intervene? Here is one possibility. India's current account has been under significant pressure in the past few years. Exports have not kept up with rising domestic demand and increasing labor costs have made it more difficult to compete in global markets.
One way to arrest this trend is by allowing the rupee to devalue. India certainly has sufficient foreign reserves to halt the rupee devaluation, but so far it is choosing to let it go.
Bloomberg: - The Reserve Bank of India sold dollars, two traders with knowledge of the matter said, asking not to be named as the information isn’t public. The bank sold “small amounts” to smooth volatility rather than protect a certain level, one of them said. The country’s foreign currency stockpile was $290.7 billion as of June 14, down from an all-time high of $321 billion in 2011, official data show.
It seems that the nation has decided to let the flight of capital out of the country devalue the currency, possibly to "improve" competitiveness. Inflation has not been a major problem thus far, so why not enter the currency war? Just follow Japan's example ...
- English (UK)
- English (India)
- English (Canada)
- English (Australia)
- English (South Africa)
- English (Philippines)
- English (Nigeria)
- Deutsch
- Español (España)
- Español (México)
- Français
- Italiano
- Nederlands
- Português (Portugal)
- Polski
- Português (Brasil)
- Русский
- Türkçe
- العربية
- Ελληνικά
- Svenska
- Suomi
- עברית
- 日本語
- 한국어
- 简体中文
- 繁體中文
- Bahasa Indonesia
- Bahasa Melayu
- ไทย
- Tiếng Việt
- हिंदी
India Enters The Currency War
Published 06/27/2013, 12:44 AM
Updated 07/09/2023, 06:31 AM
India Enters The Currency War
Latest comments
Loading next article…
Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.