InvestorQ : I want to understand whether the rupee is getting stronger or whether the dollar is getting weaker in the market today?
NISHA Nayak made post

I want to understand whether the rupee is getting stronger or whether the dollar is getting weaker in the market today?

Answer
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4 weeks ago


it is hard to compare because the dollar is a freely traded currency and the rupee is a partially managed currency. we will only get a clear idea if the government allows full convertibility in the rupee on the current account and lets it trade freely like the other hard currencies. That will be a true test of the rupee value.


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Priyanka N answered.
4 weeks ago


Actually, it is a bit of both. The dollar index is weakening and the rupee is also strengthening because of robust FII flows into India. Let us look at both these issues separately as the Indian rupee scales the Rs.73.13/$ mark. This is a five month high.

Firstly, it is true that FII flows are robust. Foreign investors infused to $6.6 billion into Indian equities in Aug-20. The Fed minutes hinted at an easy money policy and that has been corroborated by the MPF presented by the Fed. This has created risk-on sentiment in the market leading to massive FII inflows.

The dollar index or DXY is also weakening. Post March 2020, there has been consistent weakness in the dollar index. The dollar index has weakened 15% since Mar-20 and is actually reflecting the economic weakness and stress in the US economy. The debasement of the dollar due to monetary easing is also taking its toll. In addition, the ongoing trade war between the US and China is doing little good to America economically.


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Dinesh C Nagpal answered.
4 weeks ago


The Dollar Index is v weak due to FED Policy. In fact the INR got strong against USD only last week. We peg our currency rate against the USD based on interest rates of both central banks.