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What is the future of Rupee? Is Dollar going to appreciate?

These are the two questions I am hearing recently from Indians as well as their US counterparts. No one has answers to it, some say- the best days of Dollar are over and some are hoping for dollar to regain the past glory.

Look at these numbers: Rupee has appreciated roughly 9% in last 6 months alone and Dollar is at the weakest against rupee in last 10 years…!

rupee dollar chart | What is the future of Rupee? Is Dollar going to appreciate?

For an Indian this could mean that he is richer by 9% without doing much and has gained much more purchasing power.

However, as one may imagine, the scenario is not too good for $9 billion Indian IT outsourcing Industry. The U.S. is the biggest market for most Indian infotech companies, accounting for over 60% of the revenues this industry generates by handling back-office and other operations. So the rising rupee is putting a squeeze on earnings and thereby reducing the margins drastically. They have also to fight out other problems like Wage inflation and resource crunch.

To add to it, the stock market has taken the note of this and the stocks have also come down at an average of 5% to 7% in last couple of months.

So, What’s pushing the rupee upward? Foreign investment has been pouring into India. Since January alone, institutional investors have pumped $2.5 billion into Indian capital markets. At the same time, the Reserve Bank of India has been trying to dampen India’s 6.07% inflation, and has raised interest rates five times in past 12 months.

Lets wait and watch this Dollar-Rupee fight :)

In the meanwhile you can vote your opinion in this poll

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Arun Prabhudesai is founder / chief editor at trak.in. He jumped the Entrepreneurship bandwagon in early 2008 after a long 13 year stint in I.T Industry. You can follow him on twitter @trakin and Facebook. Arun’s Google+ Profile

89 comments

  1. Can any body suggest me that I’m holding some dollars but as per markrt rate its present value is 39.10 by HAWALA. I want atleast 1$=41 INR. What will be probability to reach $ up to 41 INR in nearest future. Should I wait till Jan 2008 as US finance will be active in Jan 2008 OR Mar 2008 as Indian budget will be announced. Friends What Do You Think???

  2. I am very optimistic! I have also read many reports (IMF, WB, ..) which point towards a stronger rupee. I am hoping, it would touch 35 to a USD by Dec 08! All the Best, Rupee!

  3. This is a very interesting subject. The variables are so many, its next to impossible to make predictions. But I do wish to discuss my thoughts. I have been observing two countries very closely. Brazil & India. The good part about an appreciating currency is Oil becomes cheaper. India, interestingly does not have an oil consumption rate as much as China. There is more and more reliance on CNG & public transportaion. Hence India's stands to benifit with appreciating rupee. On the other hand, exports will be affected. I believe the govt. would offset the savings on oil in some way to help exporters in the long run. I do not believe the services sector will be affected much. India still have lots of competitive advantage. on the manufacturing sector, we will increasingly become converters, just the way China was 15 years back. We will import basic raw materials, convert, and export. In my opinion, a continuous appreciation of the INR is inevitable. Once Rupee becomes completely convertible, it is bound to reach INR30=$1.  The Brazilian currency has appreciated 35% in last 2 years, the trend continues. Still the exports continue to rise from that country. I am moving to India next year, and since dec of 2006, not a single dollar sits in the bank, every month I continue converting it to INR.

  4. As per my belief, dollar will be depreciated for next 15 years, if the comditions remains same. This is due to large inflow of dollar to India. And indian currency became stronger in the world market with respect to other currencies too. Because at the age of globalization ( when communication is going to fast every day), all European, US, Australia , NZ are looking for cheap services for their country. And India has advantage of English language and having cheap services. While in case of China, English language a problem. That’s why india is best destination for software services. And another problem with U.S is struggling with the other countries and investing a huge amount for this. If India can play a better role in computer hardware sector, KPO ( i.e a huge unemployed sector is waiting for this), and provide corruption free service, no beuracracy, stable government. Then Indian economy boosting to its strength.

  5. 1 Dollar = x INR x = (39 – 40), Oct 07    = (39.5 – 40.5) , Nov 07    = (40 – 40.75) , Dec 07    = (40 – 42), 2008 This is calculative projection, variance depends of EURO, Election.

  6. i think dollar will not appericiate in near future because ryt now US economy is in recession period but once that period is over US economy will gain mometum

  7. My personal opinion is what happened in the late 90s in the asean economies is very soon going to happen in India. Last time India was minimally effected. This time India would be effected the most. Yes, I am talking about the FIIs investment outflow in huge amount is going to bring up the dollar to 44+ rupees. But once again that is my personal opinion and I am betting on it. At this moment FIIs are dumping money in India because they are over invested everywhere else. That amount is too much for RBI to control. I am sure all of you have read about all sorts of investments [ including terrorist money ] coming in. Traditionally it has been the IT guy / other professional sending in some investment / remittance and some FII investement. But now it’s FIIs diversifying their portfolio. Once stock markets across the world crash [which I guess would happen sometimes in 2008], it would be interesting to see what happens with this FII inflow. I am betting on a lot of outflow soon enough. Also, if the dollar keeps on going south, I would be interested in seeing what kind of outsourcing argument the ITES companies would have for their clients. To me, the current valuation of rupee / dollar is not sustainable in the long run.

  8. There is also a political parameter for getting 43+ against $. General electection in India, after left pulling its support over Indo-Us N-deal.

  9. A similar scenario existed in the late nineties. Lots of funds were poured into SE Asian economies and then were suddenly pulled out – initiating the great slump in ASEAN countries from which they have emerged only recently. One wonders if India will fall prey to a similar fiasco.

  10. anyone knows where to get a similar analysis between INR and Euro?

  11. I am presently working in export department and facing huge problems due to unusal appriciation of Re against US Dollar. Price impact is tremendus and with this it has become dificult for me to sustain with same price level , there is huge pressure on my our profit margin. In view of above, would anybody guide me, what would be senario in 2008, is it appropriate to switch over to Euro instead of US$ ? Will it be benficial to us?. I think fluctuation of Euro is stable as compare to US$. Please guide me on this and also let me know any other possible options to tackle the situation.

  12. Hi Our export margins are dropping due to the drop in dollar . Will this mean a death knell for all exporters in India and a field day for Importers ? If Importing is cheaper , what would happen to the industries in India who supply to Local markets . The company I work for has both markets . What would be the best strategy ? Can anybody suggest .

  13. Given the huge talent pool and low-cost labour, India has to offer, India’s growth is unstoppable and in summary INR is going to get stronger and stronger. There may be bit of fluctuation and we may see weakening of rupee for a short period. I am also in US and have seriously started thinking to back to India and grow with Indian economy.

  14. Same here Nirav…Need to move back…:)

  15. Adventures In Money Making

    right now the dollar is enjoying some short term strength. but i feel over the next few years the the Dollar will breach the Rs40 level and probably hit the low 30s. This sucks since I live in the US. I guess its time to move back. Damn it.

  16. i expect the rupee to touch 30 by october next year. The FIIS have no where else to invest other than india and China as these countries offer fantastic returns..With the foreign funds poring money into India the rupee is boung to appreciate and with the Indian goverment allowing the investors to come in freely the rupee is boung to appreciate in a substatial manner the trouble is when this money goes out. Its all about labour when the labour will start becoming costly the money will go out

  17. i wish us $ willbe around 47, it will contnue to raise and be storng. waht i am thining is we will grow much more if we make Indian Rupee completey convertable. If indina rupee is compelty convertable you will see , a big hawana on $ much more comming into.

  18. India’s growth is enormous in one side, but as a developed country US is struggling to comeback to ts charm. So rupee will gain its natural cycle is taking over.

  19. Thanks for your valuable feedback….

  20. Varughese Thomas

    The dollar has been on a fall against all major currencies, not just the rupee. It has a lot to do with the recession in the US right now. Once the Democrats come to power and balance the budget, we should see a new strength to the dollar. Also, the chinese stock market has begun to fall (a prophecy for the indian stock market?) I may be wrong on all counts, but i truly believe the dollar will remain strong for at least the next fifteen years, definitely above Rs 30

  21. Mufazzal, This is million dollar question. No one in the world can prdict it accuratelly. Yes, we can take a guess based on technical analysis, current Economic and political situation, liquidity and Stock market scenario. MY guess is it will stay between 40 to 41 for next couple of months and then appreciate to something like 38.5 to 39. If we have a stock market crash, as the market has really shot up, you could see a reverse trend. Hope this helps !

  22. Today 05 june 07 Rupee exchange rate against dollar is 40.537 Anbody is having an idea or prediction thast what trend will there in next 15 days. I am working for an export company, i am worried about this huge fluctuation of indian rupee against dollar…..

  23. Varughese Thomas

    thank you

  24. The rupee may regain its value in short term, however, longer term (5years or more), it is subsequently going to get stronger on back of rising economy and general positive indicators. The rupee will be rangebound for atleast a year or so, after that it will keep getting stronger unless we face some kind of calamity :) I hope that helps..

  25. Varughese Thomas

    So what do you think? Will the rupee regain its past value? Or will it appreciate any more?

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