Finally the SGD INR RATE crossed 50, it’s taken 3 years for the pair to return back to this level and there is more appreciation to come.
In Aug of 2013 the Rupee was battered to all time lows and the RBI had a new Governor in Raghuram Rajan in September. The fiscal situation looked bad then with oil at all time highs and political uncertainty in India. With some bold policy moves (NRE FD’s and FCNR scheme) and good luck (falling oil prices) the RBI was able to reign in the fall and stabilize the foreign reserves situation.
But with global uncertainty in form of referendum on Britain’s exit from EU, the trajectory of Fed fund rate increases and increasing oil prices exit of RBI governor could not have come at a worse time.
The FCNR deposits of 3 years back are due for redemption between Aug and Nov of this year which would be a 20 billion USD outflow of reserves. Gold and Oil prices have bounced back from all time lows which will add to India’s woes.
If Britain decides to exit the EU then the global uncertainty will increase and any foreign firm will reevaluate their overseas investment plans which will include India.
What is most surprising is that a RBI governor who has been dead correct in warning the other federal reserves that cheap money policy is not a cure to global financial woes and has been instrumental in stabilizing the Rupee and control inflation is being let go due to political reasons – just because he decided to disagree with the government and force them to make the right policy changes he is being penalized.
Anyway the damage has been done and I would not be surprised if Rupee hits the 75 mark against the USD by November this year and if that happens SGD INR will be at 55.
However in the short term a range of 49 to 52 would be seen. For today I expect intraday volatility where after the initial fall RBI will try to stabilize the Rupee though a gradual fall in coming weeks should be expected as the international event unfold.
….. And remember 52 is not far away.