The rupee’s fall, though, was the sharpest in the region, followed by the Indonesian rupiyah, which lost 0.52 per cent. But that doesn’t mean that India’s fundamentals are looking bleak.
The current account deficit is contained at around 2.5 per cent of the gross domestic product; crude oil prices remain steady at below $60 a barrel; and political stability works in favour of India.
The reason for the sharp rupee fall
could be traced back to its relative strength held so far. The rupee was recently overvalued by 24 per cent, according to the RBI's real effective exchange rate (REER) index, which tracks the rupee’s inflation adjusted performance against its trading partners, according to Samir Lodha, managing director at QuantArt Market Solutions.
“So, to some extent, it is a catching-up and on an year-to-date basis, the Korean won and Chinese yuan have performed worse than the rupee,” Lodha said.
“The rupee is unlikely to fall below 72.30-40 a dollar level for now, even as a little weak rupee help the country preserve its export competitiveness,” Kanjilal said.