The Headline catches the meaning
of the content but a small difference lies. Unlike the swings, we are
witnessing only the fall and not only us but the whole world needs a push on
the ground to rise higher.
It’s important to understand that
the studies of Rupee vs Dollars or for that matter between any currencies would
give similar results. Focusing on tweaking the ways of analysis is not going to
work. Moving onto recent events, the Fed sneezed and the whole world caught the
cold.
We wasted no time in blaming Fed chief
Ben Bernanke on his stance to reduce money supple to world economy. A deeper
thought reveals that this was always expected and since the 2008 banking crash
hints were in the air. All the developed nations (US, UK and even ECB) tried to
maintain interest rates as low as possible. The easiest way for the traders then
becomes to allot your money to the emerging markets and now as the cash under
hand reduces, worries start to build up. The Fed is now focusing on no more monetary
easing as the results have been far slower than expected. The rupee getting
hurt by this phenomenon as easy money has reduced.
The gyration of rupee has been
huge in the last one year. It has swung to and fro from 48.61 to 57.33 to the
US dollar. Small Investors are feeling the heat. More than 5,000 tons of
lentils from Canada are stuck in the port of Tuticorin in south India’s Tamil
Nadu state as importers have defaulted on payments following the rupee’s decline.
A nearly 10% decline of Rupee since May has hit these small businessmen on the
face, mounting to the fact that most have not hedged against the currency
risks.
The haze of complexities are
wiped of as the easing which was supposed to bail the world economy out of the
2008 crisis has become the core issue to deal with. On scratching the iceberg
one gets his attention towards Europe as austerity measures taken up by Angela
Merkel further pushed the dying economies of Europe into further dire straits. From
2008 (banking crisis) to 2011 (US debt downgrade) to European sovereign debt
crisis and finally the recent cut down on bond buying by Fed, rupee has
suffered a charismatic slide. India lacks here in having any recovery policy –
which sadly is absent. Be it UK policy of austerity or Japan’s measure to
provide easy money, policies need to be narrowed down and implemented. It’s
evident that the volatility is here to stay. It’s evident that at least now we
have to improve fundamentals. Its evident playing with rates and cash supplies
is temporary solutions which collate to bigger future problems.
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