The Rupee had lost some ground in the period up to December
2012 but was relatively stable around the year end at around the levels last
seen in 2009
However in January the conditions of November 2012 went into
reverse and the currency recovered somewhat to the start of March. Sentiment was
not particularly good though and interest rates were dropped slightly in
January
They were dropped again in March, at which point there was a
wait and see attitude.
The Rupee held its value over the period to the end of May
but April saw a radical shift in the overall currency climate. At this stage
though it was accompanied by a sense of delusion that kept the value in place.
But another rate change at the start of May confirmed the
trend.
The real shift in sentiment happened over the May-June
period with the realisation by the end of that quarter that debt levels were a
significant source of concern. By the time July started the Rupee had fallen to
below its 2012 lows.
It was over the next two months that things really unfolded
though, with the currency losing 15% of its value., much of this is August when
a number of things occurred simultaneously – a new 12 year and a new 2 ½ year
cycle started. In practical terms this coincided with attempts to support the
currency a rise in rates to commercial banks ( which itself could exacerbate
the overall problems) , levies on gold imports, etc- however these did little to
reassure nervous markets and perhaps did the opposite. In the end the problem
is the deficit and down to the
government not the central bank
The announcement of a new head of the RBOI was due to happen
anyway.
September saw the change in leadership become actual at the
RBOI and an increase in the bank rate.
This seems to have helped at least for a while as the
currency has recovered a small amount of
ground. Sentiment, however, remains very nervous.
The picture remains shaky in the final quarter, but the
conditions have changed with the new leadership. There is more credibility for
the bank, more caution in policy, and
change in foreign perspectives too. The uncertainty over rate targets
etc. is also lessening. Although the
forecast for the country is more difficult the Rupee looks more secure at this
time
The first two months of 2014 show little change from the
conditions of November and December 2014. It could be described as inertia as
external factors are more important.
The period March to May , because it corresponds with the
run up to the country’s elections, seems more focussed on relations than on
policy- there may be disputes over the direction the bank should take.
June and July see a return to some of the conditions
existing in October 2013. But this time they are even more powerful. While the
currency is not being undermined as in summer 2013, there are some pretty major
events pertaining to the debt position.
August is a mixed month and may see a rate change.
September sees another step change in sentiment, and an
excess of funds flowing- it is not entirely clear what direction this is in
though.
More important is October and November when there is a major
30 year shift in the tone of the Bank and the currency. There is a new
policy which covers rates, debt and
attempts to manage the growth cycle in the longer term. One presumes that these
will support the Rupee in the longer term.
There are indications that the Rupee may change form in
2015.
However in the first three months conditions are relatively
stable. But there are signs that some long term conditions, particularly
relating to inflation, might need to be addressed.
April and May are much more exciting . It is not all bad,
but there is likely to be some gradual value changes . The form of the
currency is subject to discussions, but
nothing firm happens yet.
There are changes ( probably falls) in the value of the
Rupee in June and July but there are likely to be fluctuations rather than a
trend.
In August inflationary factors seem to undermine the value
and there are further plans for change. The Indian chart is showing significant
events in a global context at this time so they might be the reason for the
currency effects.
September will probably see a revaluation and the new currency
taking shape.
This leads to currency price stability in the last quarter,
although there will inevitably be difficulties
with adoption by some people.
2016
These difficulties start to be ironed out in early 2016.
Inflation seems to be more controlled and the signs are that value is being
boosted.
There seems to be too much liquidity though in March to May.
As a result there could be fluctuations in value and a lot of trade. Nevertheless there is a background calming influence.
June is an extremely positive month and is likely to be
accompanied by interest rate changes to quell over enthusiasm.
July and August are more mixed months, there is a lack of
stability but it is moderated so no trend is likely. Trade volumes are also more controlled.
September is also mixed. Sentiment is good and rates may
again be changed to adapt to the newly emerging environment. There are still long
term changes occurring in the country in
the background that are affecting the overall banking sector.
The last quarter of 2016 sees continuance of these themes
but with trade in the currency being more difficult for the bank to manage at
first meaning that by December the RBOI must put in place some measures to
moderate the level of activity.
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