INR Vs USD trend & factors

·        During last Summer 2013 Rupee had seen its worst time in History touching 68 against Dollar

·        Due to Gold Import restriction & other steps taken by RBI it came down to 62 level by October 13

·        Rupee also got lot of strength from the hope of a strong Government in centre with lot of reform hope. Due to this Rupee has been the best performing currency among all Emerging countries

·        The recent Oil price fall has also been helping Rupee a lot as India Import Crude oil heavily

·        Due to improved Trade Deficit linked to Gold restriction and low Crude price India will be able to close its CAD this year at 1.5% of GDP

·        But the risk is that India is also heavily dependent of Capital Inflow to upset its CAD

·        Capital Inflow trend may change once Federal Reserve tinker its policy as USA economy has started showing better results. This risk will always be there for India  

·        Further the improvement seen last year and this year in CAD is purely artificial( policy measures) and due to external factor( Crude oil price fall) and may change any time once India remove Gold import restriction or Crude price started going up  

·        If Investment activity increase in India due to Government drive on “Make in India” Capital Gods import is likely to increase which may impact Trade deficit consequential impact to INR