Recently it is seen that the Rupee falls and with this news exporters are happy. Rupee’s whipsaw against the US dollar has kept traders on the edge for the past two years. However, the local currency’s movement relative to that of its giant northern neighbor is giving the policy mandarins in New Delhi some cause to cheer. Over the past one year, the rupee has lost about 13 percent against the Chinese Yuan. This has shown better days for Indian exporters. However, according to the chief economist of Axis Bank, competitiveness in exports depends on many factors. The exchange rate is one of them as per Saugata Bhattacharya.
He stated that it is particularly true for exports to a country like China, which has so many other advantages. This is an opportunity to explore the export markets in China. In February, exports to China rose 12.03 percent to Rs 7,650 crore, while imports increased 26.35 percent to Rs 40,162 crore, showing the latest government data. The currency impact if sustained over a long-term period would provide an advantage to Indian exporters to China. We need to see how the rupee depreciates against the dollar compared with other competing currencies. Falling against the yuan on its own may not be effective.”
The rupee has to depreciate more than the currencies of other countries that supply goods to China. The rupee lost 3.9 percent to the greenback while the Chinese currency gained about 8 percent against the dollar over the past one year, show data from Bloomberg. India’s largest trading partner is China, with bilateral trades reaching almost $72 billion in 2016-17, a surge of 88 percent from $38 billion about nine years ago.
The Wuhan Summit broke “new ground”. Both the Prime Minister Narendra Modi and President Xi Jinping identified the guiding principles for bilateral ties and drew up a blueprint for cooperation. India’s trade deficit with China more than trebled to $51 billion in 2016-17, from $16 billion in 2007-08. Currency value is one of the factors driving exports, though the overall growth in the importing country is also important. As the rupee has depreciated against the yuan, typically exports should become more competitive.
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