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It's not the rupee that's falling, but the US$ that's rising
Nov 28, 2016

It might seem that the rupee's value has depreciated rapidly since the government's demonetisation move was announced. But there's more to it than that. As today's chart of the day shows, when looked at versus the US dollar, the rupee looks like it has fallen in November. However, a comparison with other major currencies quickly dispels this myth.

In fact, the rupee has actually appreciated versus most other currencies, including the Euro and the Japanese yen.

This makes it clear that it is more a dollar rally that we are looking at rather than a direct hit to the rupee's value. And why is the dollar rising so rapidly? Investors seem to be betting that the Donald Trump administration will increase spending and spark an increase in inflation. Many around the world expect the US Federal Reserve to raise its short-term interest rate target next month, as well as raise it's longer term rate forecast. This expected tightening of monetary policy has taken the benchmark US yield to a sixteen month high, helping spur the dollar rally.

Data Source:RBI

This Chart Of The Day was published in The 5 Minute WrapUp - Governor Urjit Patel Off To A Disappointing Start

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