PremiumAs earlier reported by Mint, it’s not the depreciation but the pace of rupee volatility that the RBI is watchful of. It has introduced a slew of measures to stabilize the rupee, whose sliding adversely affects foreign reserves and import bills.
The rupee slid below the psychologically critical barrier of 80 against the US dollar for the first time in the spot market on Tuesday morning. While the recent depreciation has been rapid, it may not be as rapid as some other dull phases in the last 25 years, a Mint analysis suggests.
Since closing below 75 for the first time on 20 March 2020, the rupee has taken 566 trading days to touch the 80-mark. The decline from 60 to 65 is the fastest on record in this century: it took just 42 days, during the US Federal Reserve’s taper tantrums of 2013. It took 382 days for the domestic currency to slip from 70 to 75.
The analysis looks at the first time the rupee closed a trading day below each milestone, and excludes instances when it may have touched a mark intraday. The comparison should only be seen as the trend of key milestones in the rupee’s journey against the US dollar, and not interpreted as the overall pace of depreciation, which shows a lot more variation.
The Indian currency has been sliding rather sharply since the Russia-Ukraine war began in late February, and has been under further pressure due to the sharp interest rate hikes by the US Fed. The rupee hovered around 74 at the beginning of the year, and has fallen 7.1% this year so far. It had stayed rather resilient throughout the pandemic, and had in fact gained against the dollar between April 2020 and September 2021.
The worst yearly decline in the period of analysis was 19.2% in 2008.
As earlier reported by Mint, it’s not the depreciation but the pace of rupee volatility that the central bank is watchful of. It has introduced a slew of measures to stabilize the rupee, whose sliding adversely affects foreign reserves and import bills.
While the rupee’s plunge has been sharp in the last few months, it’s still no way close to the volatility last seen during the taper tantrum of 2013 and the great recession of 2008-09.