Currency News: It’s Not The Indian Rupee That’s Falling, It’s The US Dollar That’s Rising

Currency News

Currency News

This is very interesting example why when we look at the exchange rate we have to take a deeper look to see what really happened. We need to know what really happen, even if one currency rises against another, it does not mean that there is a depreciation of the foreign currency.

The Indian press has stories today talking about how the Indian Rupee has fallen against the US dollar. And while that’s true that’s not really the point. The proper point being that the US dollar is rising against most currencies. Which, given that interest rates are likely to rise later in the week in the US, isn’t really all that much of a surprise.

It’s only when we work such matters through that we can work out what, if anything, we might want to do as a matter of public policy. If the rupee falls because of something the Indian government is doing or not doing then, depending upon whether the Indian government wants the rupee to fall or not, perhaps they should do more or stop whatever it is that they’re doing. On the other hand, if this is just a specific example of a general event, the dollar rising against near all currencies, then obviously there’s nothing for India to do.

The rupee fell an over 2-year low of 67.09/dollar on Monday amid risk aversion in emerging market assets ahead of the US Fed meet later this week. This is the lowest value of the rupee since September 4, 2013.

The price change is entirely correct. But if we look at more general exchange rates we will see that the euro fell 0.16% against the dollar as well.

This is a better way to tell the news: The Indian rupee again breached the 67-mark by depreciating 18 paise to 67.06 against the dollar in early trade today at the Interbank Foreign Exchange, mainly on strong demand for the American unit from importers and some banks amid a lower opening of the domestic equity market.

The press needs to tell the story careful so there is no misunderstanding from part of the public


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