RBI would be happy with Rupee Appreciation

Leaving the rupee appreciate makes me feel that RBI would be happy to leave it appreciate. This is mainly because of the fact that imports would be cheaper and India imports more than it exports. There are other goods like Gold and Crude Oil which would be cheaper and impact inflation to reduce it.

At the same time, exports would be impacted and the biggest losers would be IT Sector. IT majors like TCS have been bracing for a weakening dollar. TCS on Monday announced that it has obtained a $1-billion hedge at a price range of 43.5-44.00. However, small exporters who do not have opportunity to hedge will be worst hit.

On Monday, Rupee touched a near ten year high of 41.75 against US Dollar.

Sundeep Bhandari, regional head-global markets, South Asia, Standard Chartered Bank said: “The absence of sustained intervention from the Reserve Bank of India in the past few weeks has provided the market with the much-needed direction. The dollar will remain weaker in the near-term, while the UK pound and the euro are expected to start weakening against the greenback only in the medium term.”

Report says that within Asia, the rupee and the Chinese yuan are expected to outperform, while others such as the Singapore dollar, the Taiwan dollar and the Korean won may not be doing so as they are not dealing with large forex inflows.