The Rise And Fall of BRIC

Over the last few months, the depreciating rupee has created a stir in the markets. Last week it touched the lowest level ever by going beyond the 57 mark to close at 57.30 against the dollar. There are tons of reasons attributed to the drastically declining rupee which range from structural defects to downgrades by rating agencies. It is important to bring to light that all the four currencies consisting of the BRIC (Brazil, Russia, India and China) nations have seen major currency depreciation over time.

Brazil’s consumer default rate has risen to the highest level since 2009, Russian oil export prices are at an 18-month low, India’s budget deficit has widened and China’s housing market is at a low.

The reasons for the decline are varied but the gravity of the situation is similar for all these developing nations. On a year-to-date basis, the Brazilian currency real is down by 10.85 per cent while the rupee has gone down by 7.46 per cent. The Russian ruble has fallen by 3.48 per cent while the yuan has fallen by 1.2 per cent since March, after the government widened the amount the currency that is allowed to fluctuate each day.

The downfall in BRIC currencies has been grave to a larger extent over the last quarter with the real, ruble and rupee falling by 12 per cent, 11.5 per cent and 10 per cent respectively. Domestic and global variables have affected the BRIC nations to a similar extent. All of them are facing a major currency depreciation which reflects the intensity of the situation. They grew multifold together and are now losing out together.