The Indian rupee has been one of the worst-performing currencies in Asia in 2020, as it is failing to capitalise on the weak US dollar and unparalleled foreign fund inflow.
The rupee has tanked by 3.28% against the US Dollar, owing to increasing intervention of the Reserve Bank of India (RBI) in the foreign exchange market, Deccan Herald reported.
The only currency which has marginally underperformed as compared to the Indian rupee is the Pakistani rupee (dipping 3.53%), as the country has been majorly affected by external debt.
The Thai Baht (heavily dependent on tourism) is the only currency that has depreciated in 2020, dipping 1.42%.
‘One of the reasons why the Rupee has remained stable or not appreciated compared to its peers is RBI’s intervention in the markets on both sides i.e., on the sell-side and on the buy-side of things,’ Sriram Iyer, Senior Research Analyst at Reliance Securities said.
The RBI kept purchasing the weak US dollar, which in turn, led to an increase in demand for greenback vis-a-vis Indian rupee.
According to data from the central bank, forex reserves with the bank is at a record high at $579.35 billion, with forex assets at a high level of $537.39 billion.
In December’s monetary police meeting, the RBI accepted that currency interventions are not just about ‘managing volatility anymore and are enabling the orderly evolution of the exchange rate in consonance with underlying domestic fundamentals.’
‘We continue to see Rupee underperform despite huge amounts of foreign fund inflows into domestic markets even as global central banks continue to maintain their accommodative monetary stance, along with major economies maintaining loose fiscal stancce,’ Iyer said.
