Re falls the most against greenback

After witnessing a strong rupee for most of FY08, this financial year has begun on a rather weak note for the currency markets. The rupee has ended up being the worse performing currency against the dollar among emerging market economies since March this year. It fell 7% against the greenback since March 31, while the Chinese yuan has remained almost flat against the dollar during the same period.

The Korean won, was the next worse performer as it weakened 5% against the dollar in the same period. Interestingly, many Latin American currencies like the Argentine peso and the Brazilian real have strengthened against the dollar. Though this trend may bring in some cheer for exporters, it may not spell good news for the country’s import bill, which is hitting the roof on account of soaring oil prices.

At the macro-level, the apparent reason is the soaring global commodity, food and crude prices. Though India is not a major food importer, it relies heavily on oil imports which account for more than 20% of the country’s import bill. The consumers are largely insulated from global crude oil price rise as the government steps in to subsidise the final price. But there is little that the government can do to curtail the country’s import bill at such times.