The rupee is impacted by three factors

The rupee is impacted by three factors

🔸 One, the US dollar will strengthen further as interest rates of dollar denominated securities begin moving higher. This will make rupee decline.

🔸 Two, if FPIs continue to pull money out of stock and bond markets that will weaken the rupee too.

🔸 Three, if global risk aversion increases, money is typically pulled out of riskier assets such as emerging market assets in to safe havens such as gold and US treasury instruments. This will impact rupee too.

🔺 Note: If interest rates in US increase, the spread between US and Indian government bonds will narrow causing global funds to pull money out of Indian G-secs. RBI will therefore have to raise interest rates in India to prevent FPI outflows from Indian bond market.

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