Jun 28 2018

USDINR ideas – Rupee not so weak at all time lows?

Today is a memorable day. Rupee has weakened to an all time low of 69.09 – such a level was never seen in history. Levels at 68.80-68.90 was attempted thrice before and it had held rock solid. Today it gave in. Being a forex professional, such a level causes concern – but, it also brings in new levels of excitement. 

What has dragged rupee to its all time weak levels is common knowledge – US-China trade tariff war,  weakening Chinese Yuan (and Asian currencies), FII outflows from India, persistently high crude prices, rising US bond yields, etc, etc. A larger and more relevant question is – has the rupee weakened in isolation or has it been swamped by the general weakening of all currencies against the US dollar? 

Let’s have a look. Check the rebased chart below – various currencies’ performance against the US dollar since 1 April 2018 till date.

The R currencies, Brazilian Real (yellow line) and South African Rand (dark blue line) have weakened a whopping 16%. The other R currency, Russian Rouble (red line) has plummeted 10%.

The European majors, British Pound (grey line) has plunged 7.3% while Euro (pink line) has weakened 6.5%.

Compare the above with the Asian currencies: South Korean Won (green line) has declined 6.3%, Indian Rupee (orange dotted line) fell 5.7%, Chinese Yuan (purple line) has fallen by 5.5% and Singapore Dollar (light blue line) has dropped by 4.2%.