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Trend in Emerging Markets' Currency in Dec
Monday, 06 April 2015 06:23

Trend in Emerging Markets' Currency in Dec

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Rupee continues depreciation on third session this week. Today the currency opens at 62.42 after yesterday close at 62.34.

It is found that all emerging market currencies have depreciated against dollar in this week. Rupee is following the same trend. The currency depreciated on Wednesday as Greek market fell more than 10% after the Government announcement to hold presidential election as early as on Dec 17 and Fitch Places Japan's 'A+' IDRs on Rating Watch Negative (RWN).

Rupee weakened on Thursday up to 62.35 as OPEC estimated fall in oil demand in 2015 which tumbled global stock market especially U.S stocks. Price war between oil producers is hurting some energy businesses in U.S. which are having high cost of oil exploration.

Today, weakness in INR remained constant without any major event at global market that raises some other possibilities. Is it oil buyers depreciating currency to 9 month low or it is FII selling in equity market?

Lets check both possibilities.

There could be possible buying of oil importers near to 62 level but it would be unreasonable to expect importers' demand at depreciated level. Yes, panic in the market could have led rupee near to 62.50 but then it should have appreciated quickly from this level after the end of buying but that has not happened.

If we look at last few days FII outflow from equity market then it shows that foreign investors have sold 2.2b rupees stocks on Tuesday and 8.08b rupees stock on Wednesday. Fundamentally economy is performing well and according to RBI Dec monthly report the economy is expected to grow by 5.5% in 2014-15 and by 6.5% in 2015-16. Inflation expectations for medium and longer term have moderated in the recent period. Today also we are watching loss in securities having high Foreign Investment.

If we look at historical records then in last five years it has been observed that rupee has depreciated in Dec. It could be due to investors withdrawal before festival season. Below mentioned is the rupee movement in Dec.

Year

Dates

Low (on the starting date)

High(on the ending date)

2010

7th Dec to 20th Dec

44.65

45.65

2011

2nd Dec to 15th Dec

51.19

54.30

2012

6th Dec to 21st Dec

54.04

54.99

2013

9th Dec to 20th Dec

60.84

62.45

2014

5th Dec to Till Date

61.7712

62.5057

We can observe the depreciation trend here in rupee till the end of third week in Dec. Then-after there was seen gradual appreciation in rupee in all these years. We may see repetition of the same trend in this month too. We may see rupee again in the range of 61.90 to 62.10 in coming week.

Not only in rupee but if we ignore some exceptions then the same depreciation was also seen in other emerging market currencies. Russian Ruble, Brazilian Lira, African Rand and Indonesian Rupiah have also depreciated in Dec against dollar. Mainly it could be due to FIIs withdrawal for short term but the appreciation comes as they resume in the markets.

Here is the Emerging Market Currencies trend in Dec.

Indonesian Rupiah

Year

Dates

Low (On the starting date)

High (On the ending date)

2010

76h Dec to 22nd Dec

8988

9055

2011

8th Dec to 29th Dec

9000

9218

2012

3rd Dec to 26th Dec

9595

9811

2013

2nd Dec to 30th Dec

11705

12276

2014

1st Dec to Till Date

12235

12453

Russian Ruble

Year

Dates

Low(On the starting date)

High (On the ending date)

2010

Appreciation in Currency

2011

2nd Dec to 20th Dec

30.46

32.17

2012

13th Dec to 17th Dec

30.49

31.03

2013

10th Dec to 20th Dec

32.62

33.03

2014

28th Nov to Till Date

48.80

55.80

*The currency depreciated for only short time in 2012 and appreciated in Dec 2010.

Brazilian Lira

Year

Dates

Low(On the starting date)

High (On the ending date)

2010

7th Dec to 17th Dec

1.6685

1.7180

2011

5th Dec to 14th Dec

1.7758

1.8848

2012

13th Dec to 17th Dec

30.49

31.03

2013

10th Dec to 20th Dec

32.62

33.03

2014

28th Nov to Till Date

48.80

55.80

*The currency depreciated for only short time in 2012.

African Rand

Year

Dates

Low (On the starting date)

High (On the ending date)

2010

3rd Dec to 8th Dec

6.84

6.98

2011

7th Dec to 15th Dec

7.95

8.45

2012

19th Dec to 25th Dec

8.43

8.61

2013

2nd Dec to 6th Dec

10.12

10.58

2014

2nd Dec to 11th Dec

10.96

11.65

*The currency depreciated for only few days in 2010 and 2013.

We may see correction in rupee in near time. Today India is expected to release CPI and Industrial Production data. Stronger than expected reading may support rupee.

 

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