Modi at the helm, and the rupee falls
The Indian rupee has plunged almost 5% against the greenback since pro-business Prime Minister Narendra Modi swept to power in May – so what’s behind the currency’s fall and where is it headed next?
Foreign exchange strategists point to a confluence of factors behind the currency’s recent weakness starting with skepticism over the Modi-led Bharatiya Janata Party (BJP) government’s resolve to usher in economic reforms.
Since the election, there has been closer scrutiny on the nature and pace of reforms to boost long-term growth and curb inflation in Asia’s third largest economy.
Modi’s maiden budget, delivered in July, failed to live up to the market’s high expectations of big bang reforms.
An increase in risk aversion due to a recent flare up in geopolitical tensions and uncertainty over when the Federal Reserve will begin tightening monetary policy, has also contributed to the currency’s fall.
Weakness in the rupee is likely to be contained, say strategists, adding that new reform announcements by the government would likely get the currency’s rally back on track.
Source: CNBC
