Rupee beats 20 EM peers to remain on top as $ hits multi-month highs

By: | Published: August 7, 2015 12:21 AM

Rupee tops more than 20 emerging market currencies in performance for 2015 so far as the dollar's rise to multi-month highs against...

Rupee tops more than 20 emerging market currencies in performance for 2015 so far as the dollar’s rise to multi-month highs against a host of units has left no mark on the Indian currency.

The rupee ended flat at 63.76/$ on Thursday against the fall of not less than 0.50% in most Asian currencies. It has depreciated 1.12% this year even as Asian counterparts from Indonesian rupiah to phillipine peso fell as much as 6-8%. Only the remnimbi, the Hong Kong dollar and the Taiwanese dollar have depreciated by a lesser margin than the rupee.

The rupee derives its resilience from the cushion of an all-time high foreign exchange reserves of about $355 billion amid a rapidly improving current account position, courtesy falling commodity prices. With most commodity prices expected to stay depressed and oil prices estimated to not go beyond $50 per barrel, the rupee’s depreciation could be limited to 65/$ by December, currency players said.

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“The cushion for the rupee comes from the phenomenal savings we have from the fall in global crude oil prices, forex reserves of about $360 billion and a better fiscal position than peers,” said Harihar Krishnamoorthy, treasurer at First Rand Bank. “I think 65/$ would be the worst case scenario for the rupee,” Krishnamoorthy added.

The predicted fall in the rupee could be largely driven by the rise in the dollar index, already around 98 and expected to hit 100 in the run up to the the Fed’s September policy meet. “There is a strong possibility of the dollar index hitting 100,” said Krishamoorthy. The rise of the dollar index has affected not just emerging market currencies but major currencies such as the euro and the pound sterling. The euro has weakened 9% against the dollar while the Australian dollar has fallen 10% in 2015 so far.

The dollar climbed to multi-month high against a host of currencies and hit a two-month high against the Japanese yen on Thursday after comments from a regional Fed Reserve cemented expectations of a rate hike by the Fed in September. Asian currencies such as rupiah, ringitt, baht and peso have fallen 2-6% in 2015 so far.

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