INR: The Outperformer
Biswajit Yadav / 13 Mar 2014
The performance of the Indian currency from the past few months has been a commendable one. The INR compared to US dollar has appreciated more than 11.03% since touching the all time low figure of Rs 68.62 in September, 2013. Policy changes made by RBI governor Raghuram Rajan have ensured that the performance of the rupee does not go down anymore.
| Currencies showing the smartest gains | |||
|---|---|---|---|
| Per USD | March 11, '14 | Sep 03, '13 | Gains/(Loss) % |
| INR | 61.05 | 68.62 | 11.03 |
| BRL | 2.36 | 2.36 | -0.14 |
| RUB | 36.46 | 33.52 | -8.75 |
| IDR | 11494.5 | 11065.5 | -3.88 |
| CNY | 6.14 | 6.12 | -0.33 |
| EUR | 0.72 | 0.76 | 4.95 |
The policy steps taken by the RBI governor have been influential to the Indian economy. Till now the repo rate had been hiked thrice by 25 basis points. To increase the forex reserve the governor has announced a swap window to banks for fresh Foreign Currency Non Residents Banks (FCNR(B)) dollar funds which should be mobilized for at least 3 years at a fixed rate of 3.5% p.a.
For example if a bank paying an interest rate of 5.5% on a five year USD FCNR(B), deposit can go to the RBI and swap the USD to INR at a cost of 3.5%. The banks total cost of DCNR(B) deposits including the hedging cost is (5.5%+3.5%) 9%. The banks can now lend to lower rated borrowers at much higher levels of yields.He has also allowed the banks to borrow from overseas up to 100% of their unimpaired Tier 1 capital at the close of the previous quarter or $10 million, whichever is higher. Earlier, the limit was 50% excluding borrowings for financing of export credit in foreign currency and capital instruments.
The rupee has appreciated by more than 11% in the last six months and now it is trading at Rs 62. The whole credit goes to the new RBI's governor Raghuram Rajan. There were numerous occasions where a policy initiated was against the expectation of the market but it was good for the economy and for the currency. Due to this now we expect that the economy will grow at a rate of 4.9% in the end of FY13-14 and it is expected that the current account deficit (CAD) will reduce to $35 billion as compared to $88 billion in the last fiscal year 2012-13. The forex reserve is expected to rise by $15 billion at the end of FY13-14.At the same time the government has taken several measures to increase the export and to reduce the import. To curb the import the government has increased the custom duty on gold to 10%. Due to this the export from April 2013 to February 2014 grew by 4.8% to $282.7 billion and the imports have contracted by 8.6% to $410.8 billion. The trade deficit during this period was down by 29% to $128 billion.
Till the end of this fiscal year if everything remains in control like the inflation rate, CAD data coming, positive sentiment from the FIIs, the Indian rupee may see some further appreciation.If you want to stay updated with the share market news today, keep a close watch on the indian stock market today with real time movements like sensex today live and overall stock market today trends. Investors tracking ipo allotment status, ipo news today, or the latest ipo india can also follow daily updates along with bse share price live data. Whether you are learning how to invest in stock market in india, preparing for a market crash today, or searching for the best stocks to buy in india, insights on top gainers today india, top losers today india, trending stocks india and long term stocks india help in making informed investment decisions.