Unfortunately, with India inc again adding only probably less than 10% of its External Borrowing Capacity in debt, the Rupee and the equity markets have consequently snagged on the Asian free fall, and now pro bably rupee has a trading target of 4-5% in this move to achieve the new 2014 equilibrium. While the stabiity is currently lacking it is primarily because for the Rupee it is not a daily volatility that is germaine to the currency markets and the trading range is much smaller than the other asian markets while it is still not picked upa s foil to the ultimate managed currency the Yuan which is a precipitating event of greed in the “Currency Wars” mechanism
Having said that, if one were to herewith propose a new rupee exchange with its limited degrees of freedom, the government cannot and should not bother about stepping in till even 65 levels and find meanwhile a longer run solution to the CAD, while the markets will take the Rupee down to 65 and fundamentally destroy the entropy required for recovery to resume in the aftermath and while it may be a jurassic/triassic notion of yore , destory the eigenvalues of Purchasing power parity much before the global market engagement is increased to a true equilibrium.
Mumbo jumbo apart 58.50 should hold because of the stability of governance and the defeat of inflation but if it is whirled through the week, it will tip to 60-61 levels and thence may not ever return to anywhere near Friday exchange levels because the fifth of GDP that is exports will straddle the rupee for the remaining term of FY14 for Global trade agreements for the year
On the equities front, today’s event of correlation in moves actually mirrors the hidden correlation in capital moving out primarily from debt and in probably a stabilised form of market prediction from JP Morgan asking that the recovery bottom has not happened and will happen till now. While the RBi therefore is discouraged from rate action next Monday, it has put in motion a cascade of rate cuts which it must follow through and avoid running into damage control esp as Fixed income Markets will continue yielding lower on higher demand despite FIIs leaving Indian debt in the first pike exit of QE linked withdrawal from Asia as the lowest volatile investment and thus unlikely to produce ‘abnormal profits equated with Asia’. The PPP map of the world in the meantime as reproduced here from a long left to be updated web provider of images shows the fast losing relevance of this indicator and probaby needs a trading measure to it to harness its gains.
- India Ink: What They Said: Indian Rupee Hits Record Low (india.blogs.nytimes.com)
- India Morning Report; Rupee hits final free fall, Equities avoid snag (awardz.wordpress.com)
- How low can the rupee go? (gulfnews.com)
- India’s rupee hits record low against the dollar (business.inquirer.net)
- India’s rupee hits record low against the dollar (gulfnews.com)
- India Morning Report: Just Dial IPO great hai ji, Rupee feeling quiggly (awardz.wordpress.com)
- Downslide: Rupee to FALL further (rediff.com)