FX.co ★ Too expensive currency or devaluation as rescue plan for economy

The world’s major exporting countries are interested in lowering the exchange rates. Russia, Japan, and the euro area suppress the growth of their currencies to support export. India’s government seriously considers the issue as well.

Throughout 2016 the rupiah lost only 2.7%, compared to the US dollar. Thus, Indian currency may be considered as a stable one. Moreover, according to the Bank for International Settlements (BIS), from the late-2013 to 2016 there was a 16% increase in the currency rate. The country’s government is not satisfied with the tendency. “It is unlikely that the Reserve Bank of India will tolerate constant appreciation of the real exchange rate in the following months, as that will lead to the loss of export competitive ability and consequently hinder the economic growth,” Deutsche Bank experts say. The economists are convinced that the regulatory authority will stop further rupiah exchange rate growth. An expensive currency may slow down economic growth, badly affecting export.

Some experts believe that amid expectations for the US Fed to increase the key interest rate, which will definitely lead to the growth of the US dollar, the Reserve Bank of India will seek possibilities to increase its foreign exchange reserves getting rid of the national currency.