Markets largely shrugged off the recent fall in the rupee to a record low against the US dollar, and were right to do so. With other EM currencies also weakening and inflation higher in India than elsewhere, the rupee still looks strong on broader measures. We expect it to lose more ground against the dollar over the next couple of years but, with India’s external position looking secure, the risk of debilitating sell-offs like the one experienced in 2013 is low.
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