India’s rupee was one of the hardest hit currencies on the current USD rally. The rupee depreciated 1.8 percent to 60.73 per dollar after reaching 60.77, its lowest-ever level versus the greenback. Stronger fundamentals from the US further fueled by the European Central Bank pledge for lower interest rates drove the dollar higher across the board.
The Indian economy has faced challenges this year. In April markets started showing less optimism about its growth and started selling the currency. This trend has been accelerated by the current global economic conditions.
The Bank of Japan and ECB monetary policies fueled the appetite for emerging markets. The US Fed’s announcement of a tapering of its QE program has forced investors have sell EM stocks and bonds, driving the currency to an all time low.
Investors are now divided as some have already started moving back to the rupee sensing a good buying level, while others are waiting for a deeper drop as other factors such as the Euro zone’s weakness will continue to impact global markets.