homemarket Newscurrency NewsFIEO says strong rupee against depreciating competitor currencies causes concerns
FIEO says strong rupee against depreciating competitor currencies causes concerns
The rupee has appreciated nearly 9 percent from its October 2018 lows, while, on the contrary, the Chinese currency has depreciated around 7 percent, said Ajay Sahai, director general and CEO of Federation of Indian Export Organisations
The government's plan to raise a part of its gross borrowing in foreign markets through a sovereign bond will strengthen the rupee, which is currently trading at an 11-month high. Experts believe that the rupee is performing well and there is nothing eyebrow-raising there. But the depreciation of other competitor currencies is a matter of concern.
"The rupee is a relatively good performer this year and I don’t think a degree of outperformance is huge or eyebrow-raising," said Pradeep Khanna, MD and head of FX trading of HSBC India. "It is within the ballpark of how currencies normally do move and we are on the stronger side.”
Khanna said there is a bias of appreciation of the Indian rupee in light of the government's foreign currency borrowing plan. "While the Fed is cutting, it still looks like the US economy is doing far better than a lot of other economies in the world. I think the dollar will perhaps trade a little bit softer for the moment," he added.
If the rupee appreciates without huge volatility, it will benefit the economy. But a concern is that not only the rupee is appreciating, but many of the competitor currencies are depreciating, said Ajay Sahai, director general and CEO of Federation of Indian Export Organisations (FIEO).
"We are concerned about how our competitive currency is performing and over that we hardly have any control,” said Sahai.
The rupee has appreciated nearly 9 percent from its October 2018 lows, while, on the contrary, the Chinese currency has depreciated around 7 percent, Sahai added.
Sajjid Chinoy, chief India economist, JPMorgan, said the Reserve Bank of India is intervening aggressively in the rupee's movement as it has bought between $10 billion and $12 billion in the last few weeks. "It is all being sterilised in the forward market, so you cannot see it in liquidity."
"On the INR/CNY if you go back the last two-three years, Rs 10 to a CNY seems to be a line in the sand so let us hope we don’t appreciate much beyond that,” added Chinoy.
Key highlights
HSBC India
JPMorgan
FIEO
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