![]() As such, the current dynamics are unlikely to play out in the mid-term," said Joshi, adding that the weakening bias on the Indian currency will hold. "Central banks in advanced economies, including the U.S., are trying to bring down inflation and even their framework mandates a lower inflation rate than India's. That differential has now come down," Nayar said.ĭK Joshi, chief economist at Crisil, however, said this change in dynamics is transitory. and that the inflation differential is one reason the rupee will remain a depreciating currency. "The premise always was that inflation in India is higher than the U.S. Post the Covid-19 crisis, however, developed markets have seen a surge in inflation while India has seen more range-bound price pressures due to its new inflation targeting framework. and a developing economy like India is a key factor driving depreciation in a currency. Over the medium term, will the expectation of a steady depreciation in the rupee shift due to a change in the inflation balance? Theoretically, the inflation differential between a developed economy like the U.S. Here is a look at the exchange rate between the Indian Rupee and the highest currency against the Indian Rupee, the Kuwait Dinar: Current Exchange Rates 1 Kuwaiti Dinar (KWD) 3.29 USD 1 Indian Rupee (INR) 0.013 USD 1 KWD 245. RBI intervention has kept the rupee more or less a median performer over the last many months, Banerjee said. The highest currency against the Indian rupee is the Kuwait Dinar. "The terms of trade deterioration hasn’t led to a meaningful trade-weighted depreciation in the rupee." ![]() The real effective exchange rate has barely budged in this recent upmove in crude oil prices, Devesh said. This trade-weighted rate against a basket of 40 currencies measures the competitiveness of the Indian unit. Since the rupee is weakening in line with other emerging currencies, the real effective exchange rate may remain steady. Kotak Securities sees the rupee average 76.50 against the dollar between April-June 2022, before strengthening to average 75.5 in the July-September quarter. That will allow the rupee to reverse course and strengthen. "For the rest of the calendar year, we expect oil prices to drift lower as a compromise is struck over Ukraine and Iranian oil hits the market," Banerjee said. Banerjee sees pressure persist between March and April but expects it to ease once the conflict winds down. The risk of a flare-up in oil, and hence a fall in the rupee, is more short term than long term, said Anindya Banerjee, vice president for currency derivatives and interest rate derivatives at Kotak Securities. Not everyone sees the rupee weakness persist.
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