Since the start of the trade war in March 2018, the Chinese yuan has depreciated 10.80% while the rupee has shed almost 8.4%
China's deliberate cheapening of the yuan and its escalating trade war with the United States is threatening to weaken currencies across the globe, including the Indian rupee, which is trading at Rs 71.28 to the dollar.
The Indian currency is facing battering and has slumped 3.8% this month. Since the start of the trade war in March 2018, the Chinese yuan has depreciated 10.80%, while the rupee has shed almost 8.4%.
As China and the US are determined to fight a protracted trade war, the quake is being felt across the emerging-market currencies and other parts of the globe. Even industrial production in Europe is feeling the shock waves.
CURRENCY FIGHT
|
- Since the start of the trade war in March 2018, the Chinese yuan has depreciated 10.80% while the rupee has shed almost 8.4%
- As China and the US are determined to fight a protracted trade war, the quake is being felt across the emerging-market currencies
|
"The slowdown in global growth and the currency war with China devaluing the yuan is putting a lot of pressure on the rupee as foreign investors seek safer investment destinations. There is an acute shortage of dollars in the market despite the Reserve Bank of India (RBI) intervening to smoothen the rupee's volatility," said Anindya Banerjee, currency analyst at Kotak Securities.
The Indian rupee is expected to gain in the short term against the dollar after the US President Donald Trump postponed the implementation of tariffs on some Chinese products. But in the long run, if there is no compromise in the trade war stance taken by both the US and China, the hammering of the emerging-market currencies are here to stay for a while, trade experts said. Mexico's peso, Brazil's real, Turkey's lira and South Africa's rand are among the most vulnerable currencies that are being impacted.
However, any thaw in trade war escalation would be positive for the rupee, said ICICI Securities in its latest report. This would help the rupee "to appreciate towards 69.0 level as during the current depreciation crude oil has not moved higher and remained near $60 billion," the report said.
The escalation in the trade war is forcing foreign investors to flee from emerging markets, thereby creating a shortage of dollars in the market. "Unless there is a let-up in the trade position taken by the US and China, the situation is expected to continue," said Ritesh Bhansali, assistant vice-president, forex risk consulting at Mecklai Financial.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Rupee")
)
The Indian rupee is expected to gain in the short term against the dollar after the US President Donald Trump postponed the implementation of tariffs on some Chinese products. But in the long run, if there is no compromise in the trade war stance taken by both the US and China, the hammering of the emerging-market currencies are here to stay for a while, trade experts said. Mexico's peso, Brazil's real, Turkey's lira and South Africa's rand are among the most vulnerable currencies that are being impacted.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}