Will 70 to a dollar be the new normal for the Indian currency?
A question popped up after the rupee plummeted to new depths in mid-August—70.80 to a dollar, the first time in its history. Should we brace for the 70s to be the Indian currency’s newest norm? No doubt, the rupee rebounded and drifted under 70 for most of the month, with the exception that it breached the mark in noon trade on August 29. But the swings reinforced fears that it could break into the 70s again because of volatility caused by global factors— the latest being US-China trade curbs, sanctions on Iran and a mismatch in demand and supply of oil.
D.K. Srivastava, chief policy advisor with EY India, expects the rupee to move around 70 at least for a quarter. He explains: “India has had a higher inflation rate compared to the US. Our inflation is about five per cent, while it’s two per cent or so for the US. The longer-term average should settle after we account for a three per cent differential. So, I would expect Rs 70 to a dollar would be the new normal.”
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