Indian rupee has recovered appreciably from the low of
68.845 on August 28. One of the important reasons is the policies initiated by
new RBI Governor, Raghuram Rajan, a former International Monetary Fund chief
economist credited with predicting the 2008 global financial crisis. His
strategy was to attract substantial dollar inflow into the country through an
attractive FCNR deposit scheme. Even banks (e.g. ADCB) in foreign countries
such as UAE snatched the opportunity to launch leveraged FCNR deposit schemes which
provided annualized returns between 12%-30% to those who opted for such
schemes.
While several other nations opted for sovereign bond
issue at similar junctures, Rajan prudently shifted the burden away from Govt.
It is pertinent to note that the countries such as Italy who opted for
Sovereign Bonds landed in trouble years later.
Indian Rupee now stands at around Rs 61/-. It looks
like the bearishness in the Indian rupee is gone (at least in the near future)
as Morgan Stanley's Kendrick forecasts the rupee will rally to 58 per US dollar
in coming months. Whilst Rajan has stated that he is not a 'superman',
his actions speaks volumes and he has a lot of proven expertise in the market
and this ought to be a differentiating factor going forward.
It looks like
those who are nervous about Indian Currency's future can take a sigh of relief.
Soon he may face another (rather unlikely, yet not
impossible) problem of too much strength in rupee - because the
economy is weak and too strong a rupee may not be good for economic growth.
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