The Rupee had another very volatile week as new all-time lows were recorded against major global currencies. The markets have continued to deliver their sense of reality of the economic situation in India, even if local officials do not fully agree. On Wednesday, in the worst slide in almost 18 years, the Rupee fell to an intra-day all-time low against the US$ of 68.80, against the GB£ of 106.98 and against the Euro of 92.00. However, on heavy selling of US dollars by the RBI yesterday and today the Indian unit recovered very smartly. In August it has fallen 8%. Weak economic growth, a record high current account deficit and ongoing concerns about Government finances are proving a toxic combination in undermining confidence in the economy.
David Fuller's view The INR's slide against the USD (weekly
& daily) looks climactic, suggesting
that that a low of at least near-term significance was reached last Wednesday.
However, confidence in Mr Singh's government has certainly been shaken this
year, both domestically and internationally.
Inflation and unemployment remain serious problems. Nevertheless, some of India's exporters which earn most of their revenues from overseas are not doing badly, not least Tata Consultancy Services, albeit temporarily overextended (weekly & daily), which we regard as an Autonomy. (See also Eoin's comments on 16th August.)
Interestingly, India's Sensex Index (weekly & daily) has seen a downside failure in its choppy range. Failed breakouts from ranges are often followed by at least a retest of the opposite boundary. However, a push above the 200-day MA is the first hurdle and this remains a nervous stock market.
Here is Bloomberg's latest editorial on India: Politicians Talk, the Rupee Drops, India's Economy Tanks.
India's tired and uninspiring government is adding to the country's myriad problems. The general election should be brought forward.