Unfair Value of Rupee?
I came across this interesting article on Bloomberg about
the fair value of rupee. While the article mentions that the Reserve Bank of
India (RBI) and International Monetary Fund (IMF) believe that the rupee is
overvalued or the recent gains of rupee are overstated, the State’s Ministry of
Finance has worked out a separate gauge to measure rupees performance.
While RBI’s gauge measures it to be 16% overvalued, a gauge
compile by BIS says it’s fairly valued.
Here is the link to the article:
While experts from various banks and currency trading
outfits have opined about their view and perspective on rupee’s overvaluation,
I am left a bit perplexed on two counts:
a) Is
Indian Rupee really overvalued?
b) Is
this article released deliberately at a time to open a fruitless discussion,
when the rupee has suddenly crossed the bridge (please see the chart to
understand what I wish to indicate)
c) Is
there some big operator unwinding long positions?
While during the next couple of days, it is premature to
say what direction rupee is bound to take, the odds are definitely tilted
towards gains for the rupee, in the immediate future – say a month onwards or
so – for the US Dollar has fallen below the lower band of the squeeze formed as shown in
the chart below. Losses in rupee value, if they occur, will be minimal and will
be capped, despite the fact that there are heavy odds in favour of the FED
rates going up by a quarter percentage point during its meeting to be held on
14-15th March 2017.
The readers of this article are also recommended to refer to
my previous articles on the same subject, the links of which are given below:
“What is going to happen to USD after this?” dated
September 11, 2015
“USD all set to rock the Currencies and other Financial
Markets” dated September 19, 2016
My study is based primarily on USDINR and my study most of
the times leaves me with this question, “Is Rupee really under the control of
RBI?”
The author can be contacted at: riskadvisory@outlook.com
DISCLAIMER:
These
extracts from my trading books are for educational purposes only. Any advice
contained therein is provided for the general information of readers and does
not have regard to any particular person's investment objectives, financial
situation or needs and must not be construed as advice to buy, hold and sell or
otherwise deal in any kind of commodities, currencies, securities or other
investments. Accordingly, no reader should act on the basis of any information
contained therein without first having consulted a suitably qualified financial
advisor.
