Indian Rupee Holds Fast against Recovering US Dollar amid Asian Market Meltdown Today

Rising ‘Greenback’ Fails to Dent Rupee’s Stability in INR-USD, RBI’s Rajan Talks Cause and Effect

The Indian Rupee to US Dollar conversion rate has come out surprisingly well from the continuation of ‘Black Monday’ that hit the world’s stock markets for a third day running, although the road to a strong Rupee has seen a massive pothole along the way. The Rupee peaked slightly on Monday morning but soon nosedived from 0.0151 into a trough of 0.0149, the worst performance of the Rupee against the US Dollar since 2013. As the market mayhem continued into a second day, the Rupee extraordinarily climbed out of its slump to reach a high yesterday of 0.0151. This came along with the news that crude oil was continuing to scrape the bottom of the barrel, having fallen below $39.00 per barrel on Friday, the lowest price in over 10 years.
Against unfavourable circumstances (chiefly the recovery of the US Dollar today), the Rupee has remained steady in the pairing. The ‘Buck’ has trended narrowly against the Rupee today; elsewhere, the Rupee has posted a 1.5% rise against the Euro and a scarcely possible 2.1% advantage against the Pound Sterling, given how poorly the neighbouring Asian stock markets are performing today.

The Reserve Bank of Indian’s (RBI) Governor Raghuram Rajan has offered his insight on the continuing situation in world markets, stating that ‘Every adverse development across the world affects the rest of the world in some way’. Speaking with the BBC’s Karishma Vaswani, Rajan was nonetheless hopeful for the future of the stock market situation, saying; ‘Based on what I’ve seen so far there’s no strong reason to believe that we’re on the verge of another crisis’ before adding ‘But we have to be vigilant about some of those fragilities that have built up’.

Further Instability could Benefit INR-USD Greatly as Status Quo remains Out of Funk

Assuming that the markets are unable to stabilise tomorrow (as seems likely), it remains a distinct possibility that the Rupee will be able to hold its ground against the ‘Greenback’ and other competitors. This is because against conventional logic the Rupee and other emerging-market currencies have comes out of the market crash far better than expected, as have the world’s commodity currencies. The greatest threat to the Rupee’s performance is still the ‘Buck’, but speculators currently seem to be deaf to news surrounding the US currency. The recently-announced US Consumer Confidence figure for August and the Durable Goods Orders for June both exceeded forecasts, but this had little impact on the currently rudderless state of the ‘Greenback’.

US Q2 GDP data is out tomorrow; this will be the surest test of the Rupee’s strength this week, as apparently improving markets and the high-impact significance of the result ‘should’ push the ‘Greenback’ up enough to decide the Rupee’s performance into the weekend.