Some further degree of rupee depreciation is possible and would make economic sense for India as the currency is still one of the strongest in the world, according to head, research, Edelweiss, Vinay Khattar.
On the real effective exchange rate basis, the fair value of rupee would be 68 against the dollar and, thus, there was a case for the currency to go down further.
“Is rupee one of the stronger currencies in the world? Yes. Is there a case for allowing rupee some degree of devaluation? My sense is yes. Because most of the economies are devaluing there currencies aggressively. China has done a bit, but other economies have done far more. The Japanese don’t want yen to go up, Europeans want euro to remain down,” Khattar told FE.
He said many economies were allowing there currencies to depreciate.