x Abu Dhabi, UAEThursday 20 July 2017

Indian rupee signals potential to be a star

What's Up: The Indian rupee may yet emerge as a star performer among Asian currencies this year.

The Indian rupee may yet emerge as a star performer among Asian currencies this year.

Even if it fails to live up to that billing, it is unlikely to repeat last year's feat as the worst performer on the continent.

The rupee slumped 16 per cent against the US dollar last year as Europe's debt crisis hit global growth and cut appetite for emerging-market assets.

But it has rebounded nearly 8 per cent so far this year, thanks in part to government moves to control speculation in foreign-exchange markets and tempt back overseas investment. It has largely worked, with overseas funds raising holdings of Indian shares by US$4 billion this year.

While the currency has wavered in recent days, analysts say the softening should be only a blip in an otherwise positive trend.

Key to the rupee's fortunes will be the actions of India's central bank. In the face of slowing economic growth, the Reserve Bank of India is widely tipped to start cutting interest rates in the second quarter. Such a move is likely to boost the rupee.

Rupee futures rose 157 per cent on the Dubai Gold and Commodities Exchange last month compared with January last year.

tarnold@thenational.ae

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