MUMBAI: India faces the risk of losing its export advantage as the rupee holds ground amidst a rapid weakening of other trade-dependant Asian currencies, Standard Chartered Bank’s head of South Asia economic research said on Friday.
The rupee has largely maintained the same level versus the dollar in the past three weeks, while the Malaysian ringgit and the Philippine peso are trading near record-lows due to a sustained weakness in the Chinese yuan.
A stronger rupee hurts India’s exporters as it reduces the value of their foreign earnings when converted to the local currency.
Rupee seen higher at open as oil tumbles, dollar retreats
Traders have pointed to the Reserve Bank of India’s intervention to prevent the rupee from tumbling past the key psychological level of 80 per dollar over the past few weeks as the greenback surged to two-decade highs.
“Currency is just one part of export performance, demand plays a much bigger role, but incrementally it (rupee not weakening as much as others) does put us in a more disadvantageous position,” Standard Chartered’s Anubhuti Sahay, said.
Other analysts, too, expressed similar worries. The rupee’s “overvaluation” compared to its peers could dent the appeal of India’s exports, said Amit Pabari, managing director at Mumbai-based consultancy CR Forex. However, some participants pointed to rupee’s relative stability as a positive.
“Investors don’t like to get into highly volatile currencies … and a stable rupee would be better for importers and exporters,” said Dilip Parmar, research analyst at HDFC Securities.
Comments
Comments are closed.