Dollar, rupee and the budget4 min read 19 Mar 2015, 04:43 PM IST
Govt must improve India's poor non-price competitiveness for the rupee to buck the trend of weaker currencies
Since October 2014 the euro has slumped almost 20% versus the dollar as expectations of monetary tightening in the US and loosening by the European Central Bank have taken hold. A strong dollar and rising US interest rates is tough going for emerging market currencies at the best of times and more so following a period of easy money. The collapse of the Russian rouble, Nigerian naira and Ukrainian hryvnia could be explained away by the collapse in oil prices and geopolitical tensions, but the emerging market currency weakness is broad based. Versus the dollar the Brazilian real is down 28% and even the Indonesian rupiah, cosseted by long-term gas contracts with Japan, has lost 8.3%. Even the renminbi is at risk of popping out of its tight fluctuation band on the side of weakness. The Indian rupee is alone in bucking that trend.