Rupee is Asia's worst performing currency. Here's why...
In this issue:
» RBI warns of bias in banking system
» India's infra needs US$ 1 trillion
» Food bill faces human resource crisis
» Eurozone is headed for doom
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Will the new economic reforms drive the stock markets?
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Reasons like the global crisis are common to all currencies and it affects the rupee as well. Investors are wary about the comparatively riskier emerging market currencies. In addition to this are India's internal problems of high inflation rates coupled with high interest rates. This has brought corporate profitability under pressure which in turn has cheesed off foreign investors from investing in the country. This in turn has added pressure on the currency.
The falling rupee has in turn hurt India's import bill. India is a net importer of goods with oil forming the largest portion of total imports. A falling rupee has increased the cost of imports which in turn has increased the current account deficit. This deficit would need to be funded through borrowings or equity investments (Foreign Direct Investments or Foreign Portfolio Investments). This increasing deficit in turn causes worries for the investor which comes back to hurt the value of the currency. Thus it becomes a vicious cycle difficult to get out of.
So what is the way out? The country's central bank, Reserve Bank of India, can step into the foreign exchange markets and boost the rupee. But the Deputy Governor of RBI has clearly stated that the bank has no such intentions. It will intervene only in the event of excessive volatility. And not to control the slide of the rupee that we are seeing in recent times. As India's imports grow, the foreign exchange reserves will soon become inadequate to sustain the growing deficit. This would in turn lead to a higher demand for the US dollar which would lead to a further fall in the value of the rupee. And with the RBI clearly stating that it will not intervene, it looks like rupee will continue its free fall for a while.
Do you think that the RBI is right in not interfering in the foreign exchange markets to control the fall of rupee? Share your comments with us or post your views on Facebook page / Google+ page.
01:10 | Chart of the day | |
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Data source: Financial Express |
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The Indian stock markets were one of the biggest losers during the week with the BSE Sensex closing lower by 4.8% over the previous week. Even commodities like crude and gold ended the week in losses. Amongst the other world markets, France was down by 4.8%, while Germany was down by 4.2% during the week. Even UK and US lost gains recorded in the earlier week and were down by 3.3% and 2.9% respectively.
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Source: Yahoo Finance, Kitco |
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23 Responses to "Rupee is Asia's worst performing currency. Here's why..."
ramesh shah
Apr 29, 2012IT IS SAD STORY SINCE 2000 YEARS THAT WE DID NOT GET GOOD RULAR FOR PEOPLE.PRESENT PRIME MINISTER IS OF NO USE AS IT WAS NARSIMA RAO AS PM MADE HIM WORK AS FINANCE MINISTER.CENTRAL GOVM HAS WORKED BEST IN ABSENCE OF NEHRU FAMILY IN POWER. IT WAS SAME PM WHO ACTED SO WELL WHEN PM WAS NARSMA RAO.ATALJI, DEV GOWDA ALL MINUS NEHRU FAMILY HAVE DONE GREAT WORK FOR COUNTRY. IF INDIA HAS TO PROSPER THIS FAMILY SHOULD BE REMOVED FROM POWER FOR EVER.
Yatin Parikh
Nov 30, 2011zzzzzzzzzzz.......RBI....PM.............zzzzzzzzzzzz!!!!
The US has a 15 trillion dollar debt and it's currency is growing stronger ?
The Eurozone is collapsing one by one, but euro is still at 70. This is a farce, the rupee is deliberately being kept down by the govt.
Quit India, Sonia.
Munish Agarwal
Nov 30, 2011In any case falling rupee is good for country. Every country wants and manipulate currency to remain as week currency. Reason is clear, it improves export margins and help businesses.
Ideally, currency should be market driven and RBI or any authority should only interven in case of emergency.
Say for example, Rupee is getting weaken because foriegners are taking their money out. Weaker rupee and falling stock price will stop them from selling stocks in bulk.
RBI should save their reserve for emergeny. You never know what emergency can come.
Tayi Taggu
Nov 26, 2011Why not because we have sleeping economist as Prime Minister who has no direction of his own. The order has to come from Madam Sonia and this is the tragedy of our country economic conditions and now nobody want rupee anymore because it is loosing it purchasing power on daily basis and this is why Rupee is Asia's worst performing currency. The hard fact is we earn in rupee but has to spend in dollar. God save India!
saranya
Nov 26, 2011RBI should intervene now and try to reduce the down fall in the value of indian rupee.If RBI intervenes now it can really help the country .Otherwise the whole economy can plunge into a big crisis.If RBI intervenes only at the worst situation then as like euro crisis we can see rupee crisis.India boasting itself for its profound growth will come to a standstill.
GANESH
Nov 26, 2011Investment in gold is not wrong. After all gold is gold. Instead RBI should encourage banks to lend against gold at interest rates on par with housing loans to boost growth.
SUJIT BANERJEE
Nov 25, 2011Believe many knowledgeable commentators on economics has posted their comments. I am an Engineer by proffession know one basic thing ( which i learnt during my engg study from my teachers - You study the subject throughly with clear understanding - then U will be able to deliver properly when you join your service to earn your bread or else U will be kicked out and that's why we teachers are here in the university to help/educate part our knowledge to you ) that I am here in my job to ensure my machineries run properly and delivers output so my company earns and I earn as well . I believe our Great ECONOMIST PM is bound to give answer to the people of this country the mistry of this Inflation, Rupee devaluation and how our economy is getting affected on this count. Since he is keeping quite- we are sure to believe he is in possesion of FAKE certificate or Puppet PM already sold his Vivek ( Conscience ) to those Culprtis ( must be equally having a share of that LOOT's ). A Doctor if doesn't knows his job ( diagnosis of desease) he is incompetent - if patient dies of this reason he is responsible , If a bridge collapse ( due to Design fault) the Engineer is responsible .If a plane crashes due to mishandling by the Pilot ( Mangalore crash - as the finding revealed) the Pilot is responsible . The Hospital death can be a result of many causes where Dr cannot be blamed apart from his Diagnosis fault , Similarly a Bridge when collapses there may be many causes where the Engr cannot be blamed if his Design is OK . Similarly if a plane Crashes an causes death - a Pilot cannot be blamed if it is machinery fault ( that can develop at any point of time ) . But what about our Economist MMS , Pranab Mukherjee , Montek Singh Aluwaliah ?
Many people has expressed their joy at the Killing of Kishenji ( Maoist). But what about these Killers who are killing thousands of Indian in everyday life ?
SUJIT BANERJEE :
JAYANTHI
Nov 24, 2011My son is studying in US. We are the most affected people. I feel RBI is controlled by the politicians, who wants to bring their Black Money at the existing rate of $/Rs.
Yajnanarayana
Nov 24, 2011i am sure Govt is not interfering until their money staked abroad is transferred for their requirements for elections .
This non action is also helping few high flying sectors who export their services not paying any taxes to Govt These are the guys lobbying with high flying politicians including our so called economist PM
God only help this cursed country with Rakshabijasuras at our Parliment and Vidhana Soudhas
mahbubur rahman khan
May 11, 2012RUPEE IS ASIA IN BANGLADESH WORST HANDLING CURRENCY WERE VERY POOR CAUSING OUR UNREABILITY AND IGNORENCY PRODUCT OF POPULATION.