Today INR touched all time low of 70.08 and finally closed at 69.90. Since April 2018, INR has been seeing one way weakness from a low of around 64.
In the above context, many experts have started to opine that for last few years, INR was not allowed to weaken and now with global headwinds, INR is catching up with weakness which should have happened over last few years.
We did research on INR movement of last 5 years to see if there is any pattern of policy makers trying to restrict INR weakness. We also studied the weakness pattern of other emerging market currencies during this period. The key outcome is as follows:
1. There is no pattern to suggest that policy makers intervention was biased towards restricting INR weakness. The pattern suggest that there were equal number of instances when INR retraced back from level of about 68.80-69 and same number of instance when INR bounced back from lower level of 63.50-64.00.
in last five years (as shown in graph 1), there were four occasions where INR paused to weaken above 68.80-69 levels. These occasions are marked in red circle; similarly there were four occasions where INR paused of gains below 63.50-64.00. These are shown in blue circle.
2. As regards to movement of other currency pairs, the research suggests that there are clearly two set of currency pairs – One set of currencies like ZAR, MXN, BRL, RUB, TRY which faced peculiar situation and saw massive weakness in range of 40% to 200%.There is another set of currencies like THB, TWD, BDT, KRW primarily from Asian and INR was one of them. INR movement was in line with in second set of currencies. For example, INR weakened by 13%, CNY weakened by 14%, PKR weakened by 19%.
This analysis also suggest that INR movement was in line with other currency pairs and does not suggest any bias of policy makers to keep INR weakness under check.
*Disclaimer: Best efforts have been made to present the analysis and data as correctly as possible. However, it is prone to errors and therefore clients are expected to do their own analysis, independent of what is shared above, before taking decisions. This is neither a solicitation nor a recommendation to Buy/Sell any currency. No representation is being made that any suggestion being made above will necessarily result into profits and principals/employees/