Rupee's backloaded retreat against the dollar mars year of rare stability
US dollar adds, at least theoretically, imports-fed inflation risks, and another layer of complexity to a decision on the cost of funds in an economy that logged its most circumspect pace of growth in seven quarters in the three months to September.
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It is not unusual for the currency of an emerging market to depreciate vis-a-vis the US dollar. The rupee is no exception to that rule. This year will mark the seventh straight calendar year of retreat for the rupee, which has lost more than 35% against the dollar through a decade of steady expansion in both merchandise and services trade.
What's unique this year is the rupee's backloaded decline after three quarters of relative calm. India's currency, and its risk assets, have receded in lockstep since the US Federal Reserve, on September 18, made an outsized reduction in its policy rates — the first in four years.
Data showed the rupee, which had previously weathered another bout of stock-market volatility through April and May in the form of nearly ₹34,000 crore of net exits by overseas funds ahead of the general elections, wobbled only after the Fed slashed rates to avoid a hard landing.
Mumbai stock indices reached their peak in nine days after the first US rate cut, and overseas investors have since shed nearly ₹1 lakh crore until December 27, data from NSDL showed (see
