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Business News›News›Economy›Indicators›FM Nirmala Sitharaman says Indian Rupee is
weakening because the Dollar is strengthening. Experts agree



THE ECONOMIC TIMES DAILY NEWSPAPER IS AVAILABLE ONLINE NOW.

Read Today's Paper


FM NIRMALA SITHARAMAN SAYS INDIAN RUPEE IS WEAKENING BECAUSE THE DOLLAR IS
STRENGTHENING. EXPERTS AGREE

SECTIONS
FM Nirmala Sitharaman says Indian Rupee is weakening because the Dollar is
strengthening. Experts agree
By
Anand JC

, ET OnlineLast Updated: Oct 17, 2022, 08:46 PM IST
Synopsis


FINANCE MINISTER NIRMALA SITHARMAN LAST WEEK REMARKED THAT THE INDIAN RUPEE
HASN’T WEAKENED BUT IN REALITY, IT IS THE US DOLLAR THAT HAS STRENGTHENED.
SOCIAL MEDIA AND THE OPPOSITION DIDN’T TAKE TOO KINDLY TO THE MINISTER’S CLAIM,
BUT DATA SHOWS THAT THE MINISTER’S VIEWS ARE ACCURATE. THE US DOLLAR HAS BEEN ON
A ROLL IN 2022.

ET Online
Finance Minister Nirmala Sitharman last week remarked that the Indian Rupee
hasn’t weakened but in reality, it is the US Dollar that has strengthened.

“The Indian Rupee has performed much better than many other emerging market
currencies,” Sitharaman said at a media briefing in Washington D.C. on Friday.
The Reserve Bank of India (RBI) was working to contain the rupee’s volatility,
she said, adding that the “Rupee will find its own level.”

Social media and the opposition didn’t take too kindly to the minister’s claim,
but data shows that the minister’s views are accurate. The US Dollar has been on
a roll in 2022.



“With the aggressive hike in interest rates, the Dollar Index (DXY) continues to
remain strong to its 20-year high, trading at 112.89 levels. This has made the
Indian Rupee depreciate against the US Dollar,” said Megh Mody, Commodities and
Currencies Research Analyst, Prabhudas Lilladher Pvt Ltd.





“Domestically, RBI has utilised $100 billion of reserves just to save the slide
of the Rupee against the Dollar,” he added.

The greenback bull run
Stung by decadal-high inflation, the US Federal Reserve promptly turned hawkish.
This, coupled with US economic strength and haven demand, has helped the US
dollar notch multi-decade highs against prominent peers while the Indian Rupee
and pound are languishing around record lows.

The US dollar is currently at its highest level since 2000. It has gained 22%
against the yen, 13% against the Euro and 6% against emerging market currencies
since the start of this year.

“Such a sharp strengthening of the dollar in a matter of months has sizable
macroeconomic implications for almost all countries, given the dominance of the
dollar in international trade and finance,” the International Monetary Fund’s
Gita Gopinath and Pierre-Olivier Gourinchas wrote in a blog recently.

The market sees the greenback as the ultimate haven and experts suggest that
amid worries of global recession fears and the ongoing Russia-Ukraine war, the
bull run of the dollar is not yet over.

And this might not necessarily mean good news for emerging markets like India.




'RUPEE IS NOT SLIDING, US DOLLAR IS STRENGTHENING': FM NIRMALA SITHARAMAN ON INR
DEPRECIATION


Union Finance Minister Nirmala Sitharaman addressed the media, in Washington DC,
on her official visit to the USA. She responded to ANI's question on the value
of the Indian Rupee dropping against the Dollar as geo-political tensions
continue to rise on measures being taken to tackle the slide.


A weaker Rupee? The reality

Despite the RBI’s best efforts, the Indian Rupee did breach the psychological
level of 80 and dipped to record lows. The rupee slipped 19 paise to 82.38
against the dollar in early trade on Monday.

The local currency has slipped 8% against the US dollar this year.



"I won't see this as the Rupee sliding but as the Dollar strengthening. It is a
matter of fact that the Rupee has withstood the rise of the Dollar. But it has
performed better than many other emerging market currencies"

— FM Nirmala Sitharaman



The Indonesian rupiah and the Indian rupee were the top-performing emerging
Asian currencies in the three months to September, as per Bloomberg.

The opposition came down heavily at this claim made by the minister, with some
claiming that Sitharaman qualifies for a PhD in Economics.

“The Rupee is now at the cusp of crossing 83 against 1 USD and it seems Prime
Minister Narendra Modi "will only stop after it crosses 100", one Congress
spokesperson said.

There is no denying the fact that the Indian economy continues to recover from
the damage caused by the Covid-19 pandemic.



ET Online
Source: IMF



Inflation remains a worry for the growth of the Indian economy, with retail
inflation remaining above the RBI’s upper tolerance threshold of 6% for the
ninth month in a row in September and hitting a five-month high of 7.41%.

With persistent inflation, global bodies continue to tweak their projections for
the Indian economy’s growth in the medium-term downwards.

With global central banks going into hawkish overdrive in a bid to cool prices,
the dollar strengthened. However, India isn’t exactly an outlier among emerging
markets in terms of local currency performance.

Many were ahead in the global monetary tightening cycle. Consequently,
exchange-rate pressures for the average emerging market economy have been less
severe than for advanced economies, and some, such as Brazil and Mexico, have
even appreciated, the IMF noted.

“Technically, USD-INR continues to remain strong and can surpass the level of
83, reaching close to 84 levels in the coming month. As far as there is no
discontinuation of higher highs and higher lows the bias remains firmly positive
for the pair,” Mody added.

In Video: 'Rupee is not sliding, US Dollar is strengthening': FM Nirmala
Sitharaman on INR depreciation



Thursday, 17 Nov, 2022
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