The appreciation of the Rupee can be analyzed from different angles by different class of people. In this particular article, the author provides his views on the current scenario of rising rupee vis-à-vis the US Dollar. According to him, the rising rupee can provide several potential benefits to the country and proper utilization of the foreign exchange reserves can give the nation a competitive edge over other developing countries.
The rupee's appreciation against the US dollar (USD) is the latest economic event. Normally, currencies appreciate when economies are doing well and a rise in their value is cause for celebration. A currency appreciation trend in international markets is an indicator of a booming economy with increasing international business. But such an environment is charged with challenges and opportunities which require well thought out strategies to stay in profit levels in the future. The rupee is appreciating against the USD, but depreciating at different rates against other major currencies like the pound, the euro and the yen. This is making the international business scenario more complex. New strategies are needed, in order to retain and further increase the shares in international business. Companies are depending on qualified finance professionals for solutions relating to problems caused by exchange rate fluctuations. They have to develop expertise in understanding currencies and hedging risks, so as to meet the future requirements of Indian companies aspiring to become multinationals.
The rupee's appreciation against the US dollar is the result of forces of demand and supply in forex markets-more than 85% of India's international business is invoiced in US dollars. Change in the USD value has a disproportionate effect on the various entities interested in the rupee's external value such as exporters, importers, borrowers or lenders in foreign currencies, consumers of imported goods, tourists to foreign countries and others using foreign currencies for business purposes.
The inflow of USD in Indian forex markets has increased due to External Commercial Borrowings, Indian equity market investments and similar other things mainly causing the appreciation of the rupee against the USD. Market experts feel that such an upward journey of the rupee against the USD will remain intact and it may appreciate by approximately 2% p.a. against the dollar. |
