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Rupee May End 2020 As Asia's Worst Performer

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Rupee May End 2020 As Asia's Worst Performer > Rupee may end 2020 as Asia’s worst performer Closes around ~74 to a dollar on Friday against ~72.2 at the end of Dec 2019 KRISHNA KANT Globally, the dollar has Mumbai, 21 December been on a weak wicket in the post-pandemic environment, The rupee is likely to end cal- lifting the fortunes of emerg- endar year 2020 as the worst ing market currencies. performing currency in Asia, “The dollar is weaker, the even underperforming minor US yield curve steeper and South Asian currencies such equities, commodities and as the Pakistani rupee and Sri commodity-linked currencies Lankan rupee. have gained,” wrote Abhishek In contrast, most Asian Goenka of India Forex Adv - currencies have either appre- isors (IFA) last week. Dollar ciated against the US dollar in Index, however, jumped on the last 12 months or retained Monday as investors sold risky their value. The rupee is down assets such as emerging mar- ILLUSTRATION: AJAY MOHANTY 3.6 per cent during the year so ket equity, leading to fall in the far against appreciation of HOW RUPEE IS FARING value of Asian currencies, other Asian currencies such as Price of local curency ($) including the rupee. the Chinese renminbi, The dollar index is however Philippines peso, South still down nearly 6 per cent in Korean won, Malaysian ringgit the last 12 months, losing and Thai baht. value against major currencies The rupee closed around such as euro, Japanese yen, ~74 to a dollar on Friday British pound, Canadian dol- against ~72.2 at the end of lar and Swiss franc. This also December 2019. In other provided tailwinds to emerg- words, ~1,000 now buys $13.5 ing market currencies, includ- against $14 a year ago. ing those in Asia. India’s cur- In comparison, the Sri rency, however, missed the Lankan rupee and Pakistani party due to a big economic rupee are down 3.5 per cent *Latest data as on December 21, 2020 hole dug by the pandemic. each against the dollar in the Source: Bloomberg, Investing.com; Compiled by BS Research Bureau “FPI inflows in 2020 are current calendar year so far. largely filling the pit rather India's South Asian neigh- Thai baht, Bangladesh taka however, have been undone than raising the ground level, bours are the worst performers and Vietnamese dong, on the by record decline in India’s given the economic contrac- after the Indian rupee. other hand, either maintained GDP in FY21 and high retail tion suffered by India due to They are followed by the their value or appreciated mar- inflation,” said G Chokk - the pandemic. India’s GDP in Indonesian rupiah that has lost ginally against the dollar in the alingam, founder & managing FY22 may still be lower than 1.9 per cent of its value against last 12 months. The Indian director at Equinomics that in FY19. This is unlike the dollar in the current calen- currency lost purchasing Research & Advisory Services. China that is likely to grow in dar year so far. power against major cur- According to data from the current year as well as the Taiwan’s dollar is the top rencies despite record invest- National Securities Depository next,” said Chokkalingam. GDP performing currency in Asia ment by foreign portfolio (NSDL), FPIs have stocks and growth is a key factor in cur- this year and is up 6.4 per cent investors (FPIs) in the domes- shares (on a net basis) worth rency movement and a faster against the US dollar. It is tic equity market. Strong FPI $21.7 billion since January this economic growth is asso ciated followed by China’s renminbi inflows generally result in cur- year. Nearly 70 per cent of this with currency appreciation. that is up 6.2 per cent against rency appreciation. inflow came in the last two FPI inflows into equity US dollar. They are followed “Macroeconomic factors months, pushing stock prices have also been partly neutra- by the Philippine’s peso that such as strong capital flows, a to record highs. This is the lised by a selloff in the bond has appreciated by 5.2 per cent weak dollar, low crude oil highest investment by FPIs in market due to inflation con- during the year, South Korean prices and decline in imports a year since 2012 calendar year cerns. According to NSDL won (up 4.2 per cent), favour an appreciation in when they had pumped in data, FPIs have been net sellers and Malaysian ringgit (up 1.0 Indian rupee against major $24.4 billion into Indian in the Indian bond market to per cent). currencies. These tailwinds, equities. $14 billion in 2020 so far..
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