More to rupee recovery than Modi mania

by confuzzled dude Thu Apr 10, 2014 4:59 pm

"Indian central bank governor Raghuram Rajan faces an unusually pleasant problem: what to do about his country’s fast-appreciating currency?

Buoyed by optimism over a likely election victory for opposition leader Narendra Modi, foreign investors have begun pouring money into Asia’s third-largest economy, ploughing $5.3bn into debt and equities during March.
New moves to discourage global fixed-income investors are also possible, after the RBI barred foreign fund managers from buying short-term government debt last week, in an attempt to limit speculative inflows.

The real risk, according to HSBC’s Paul Mackel, is that the present happy period of short-term capital inflows leads India to “relax too much, thinking that the worst is over”, rather than pushing for more structural action to bring external imbalances into line.
Even so, CLSA’s Rajeev Malik backs Mr Rajan’s pledge to curb volatility and stop the currency rising sharply. “Before the RBI often allowed the rupee to appreciate too much, and then things turned around and suddenly it was payback time,” he says. “They will be trying hard not to make that same mistake twice.”

http://www.ft.com/cms/s/0/a37ff6c6-be3a-11e3-961f-00144feabdc0.html#axzz2yV68YL2r

by Guest Thu Apr 10, 2014 5:05 pm

"Buoyed by optimism over a likely election victory for opposition leader Narendra Modi, foreign investors have begun pouring money into Asia’s third-largest economy...."

This indicates how pathetic the congress rule was!

by truthbetold Thu Apr 10, 2014 9:20 pm

one side affect of rupee appreciating is the decline Indian IT stock values.

by Merlot Daruwala Fri Apr 11, 2014 12:16 am

Kinnera wrote:"Buoyed by optimism over a likely election victory for opposition leader Narendra Modi, foreign investors have begun pouring money into Asia’s third-largest economy...."

This indicates how pathetic the congress rule was!

Haha..no, Kinny. Hot money is hardly the best judge of governments. The current inflow is only due to lack of sufficient investment avenues globally. With Brazil, China and Russia in the doldrums, most EM funds are left with no option but to move their money into India. And with the brightening prospects for an industry-friendly Modi sarkar, this is also the right time to get in.

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More to rupee recovery than Modi mania

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