With the rupee at the cusp of hitting 100 against a dollar, everybody is interested in, and has, a view on the exchange rate right now With the rupee at the cusp of hitting 100 against a dollar, everybody is interested in, and has, a view on the exchange rate right now. Views and predictions aside, how does the situation look like, historically speaking? HT has looked at the numbers to distil the good (there is), the bad and the ugly of the current churn in the foreign exchange markets right now. Let us look at them one by one.The rupee-dollar exchange rate is as much a sentiment shaper as it is a tangible factor for the economy.Good: Psychological thresholds aside, this isn’t the worst run on rupeeThe rupee-dollar exchange rate is as much a sentiment shaper as it is a tangible factor for the economy. To be sure, the sentiment matters because foreign exchange markets have a tendency to enter self-fulfilling spirals. The ongoing fall in the rupee’s value is concerning for precisely this reason, but it is not the worst India has had so far.
HT did a historical analysis of episodes of rupee depreciation by first calculating the rupee’s fall over different periods—namely one year, six months, three months, two months and one month—using daily rupee spot rate data since December 1979. For each period, we ranked dates by the size of depreciation. After selecting a date with a large fall, we removed nearby dates within the same time window to prevent counting the same depreciation episode repeatedly.
