BackThe run of the rupee
On the domestic currency’s rally against the US dollar
Premium(Mint)
The rupee’s rally against the dollar—lifting it from the doldrums of the past months—was largely the result of the Union government sending positive signals to the markets.
There is a limit to what signalling can do without changes in the conditions that led to the rupee’s decline in the first place.
For one, global crude oil prices remain elevated on a year-on-year basis. While the hike in diesel prices last month may have led to a modest improvement on the fiscal front, the current account position won’t improve. For that to happen, demand for fuel has to respond to fuel prices. That has not happened. In any case, the appetite for further fuel price increases is rather limited.
As the fizz injected in global markets after the third round of quantitative easing dissipates, India will have to do some heavy lifting, policy-wise, to revive investor confidence. That’s key to the rupee’s fortunes.
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