18 April, 2021

Why Rupee Will Remain Turbulent For Next Few Months

International tariff, currency and investment wars are hitting the rupee even if India is not a direct player in the churning.

Illustration by Sajith Kumar
Why Rupee Will Remain Turbulent For Next Few Months

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 morning trade on August 30. 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.”

The rupee is one of the currencies taking a hit because of...

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