InvestorQ : Where do you see the rupee taking support in the days ahead?
indhumathi Sayani made post

Where do you see the rupee taking support in the days ahead?

2 months ago

That is an interesting question, but very tough to really pin point any specific levels. The rupee is currently in uncharted territories and it is hard to really take any worthwhile call. Most of the forex experts are betting that the range of 82/84 per dollar is where rupee could find some credible support, but we have to wait and see. However, this range is justified even if one looks at the rupee dollar parity on inflation differentials. That is what even the parity ratio suggests, so it could eventually end up there. The big priority for the RBI now is to stop tightening rates and start supporting GDP growth and revive exports.

That is the crux of the problem. Unlike the US dollar, the Indian rupee does not have the exorbitant privilege of being the most preferred world trade currency or world currency for portfolio flows. That is hardly the case. Hence, tightening of rates may work to strengthen the American dollar but will have negative repercussions for India. In this case, the right answer may be to keep cost of funds in check and instead focus on encouraging investments. The priority here should be ideally to revive GDP growth, boost exports and let the FPI flows come in. INR value can be then allowed to find its own level.