Indian Currency – Sustaining Outperformance!

Continuing on from our last note “Indian Currency – Outperformance will sustain”, the Indian Rupee (INR) has remained stable against major global currencies on account of an improvement in macro-economic variables. Over the past year the US dollar (USD) has appreciated against all major global currencies. At the same time the INR has held up well. The INR was the second best performing currency against the USD in the past year and the only currency against which the USD depreciated in last month (see table 1 for performance of the USD against major global currencies).

India’s economic variables in particular the twin deficit (current account deficit and fiscal deficit) have improved significantly because of falling commodities prices especially crude oil. The government’s initiatives on easing economic hurdles, strong capital flows, and high foreign exchange reserves, have also helped the INR to perform consistently better than most of other currencies.

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