MUMBAI: The domestic currency outperformed other
emerging market
currencies this year, buoyed by lower
crude oil prices
, the practice of
purchasing crude
in rupees, and strong
services exports
that have helped maintain a manageable
current account deficit
. Additionally, the anticipation of significant foreign capital inflows, driven by the inclusion of Indian govt bonds in global indices, has further bolstered the local currency.
In 2024, the
rupee
, along with the Mexican peso, are among the only major emerging market currencies to have gained against the dollar, registering a 0.6% increase.
In contrast, the Thai baht, South Korean won, Taiwanese dollar, and Malaysian ringgit have weakened by 4.5%, 4%, 3.2%, and 2.6%, respectively.
“Resilient domestic growth, combined with a manageable trade deficit, has been supporting the strength of the rupee,” said Aditi Gupta, economist at the Bank of Baroda, in a recent report. “This strength is further supplemented by robust foreign inflows, particularly in the debt segment. We anticipate this trend to continue into March ’24.”
According to a report by ICICI Securities Primary Dealership, RBI has many reasons to allow the rupee to strengthen in the coming weeks.