Rising Rupee

For last 1 year, due to high interest rates of RBI to fight inflation and loose monetary policy of other central banks around the globe, Indian Rupee has been rising against a whole bunch of currencies.

Here are some charts for 1 year against some.

INR/Canadian Dollar

INR/Euro

INR/Japanese Yen

INR/IMF Special Drawing Rights

INR/US Dollar

With all the talk of rising dollar after the QE3 end by the US Fed, even though dollar went up, we see rupee is slightly up against even mighty US dollar in 1 year period.

Even though we have a current account deficit and a bad fiscal deficit, this is due to the low rates abroad of almost zero in the West while we have around 8% rates.

With commodity prices like Oil also down a lot, inflation is going down in India. Recent citibank report showed that we are one of the few countries in Asia with positive real interest rate which is nominal rate adjusted for inflation.

Will RBI cut our rates now that inflation is down and rupee is up and the rising rupee might hurt exporters? Probably not in near future unless consumer inflation falls below 7%. But if this continues there will be pressure from govt on RBI to cut rates to boost growth.

This also explains why Gold is down in terms of rupee.