Navigating the Ups and Downs of the Indian Rupee 2022-23 in a Volatile Global Market
The year 2022-23 witnessed high volatility in major currencies due to geopolitical factors such as the Russia-Ukraine conflict and the sharp increase in interest rates by the US Federal Reserve. The Indian rupee was not immune to this and experienced a 7.8% depreciation against the US dollar in the outgoing financial year, the most significant fall since 2019-20.?
Although the rupee has fallen by about 8% against the US dollar for the second time since the 2013-14 currency crisis, it has still performed better than many other currencies, including the Chinese yuan, South Korean won, Malaysian ringgit, and Philippine peso. The rupee completed FY23 at 82.18 to the dollar, up from 75.79 the previous year.?
The weakening of the rupee could impact consumers as it may increase the price of imported goods and make studying abroad more expensive due to currency conversion fees. However, experts predict a more stable FY24 for the rupee as the market anticipates the Federal Reserve to reach the peak of its rate hike cycle, and India's current account dynamics are also expected to change.?
The Reserve Bank of India (RBI) intervened in the foreign exchange market to curb volatility, and foreign exchange reserves, which stood at $606 billion on April 1, 2022, fell to $525 billion in the week ending October 21. Reserves have since increased, hitting $579 billion on March 24, 2023.?
领英推荐
Despite these measures, Ritesh Bhansali, vice-president of Mecklai Financial Services, says that the rupee remained bearish for 2022-23 due to stretched twin deficits, sticky inflation, and inflated oil prices, among other factors. The exodus of funds by foreign institutional investors (FIIs) also added to the woes of the rupee.?
Overall, the year 2022-23 was marked by high volatility in major currencies, including the Indian rupee, due to geopolitical factors and global economic developments. However, experts remain cautiously optimistic about the rupee's prospects for FY24.?