What it means
A rising USD/INR means a weaker rupee. The Reserve Bank of India manages sharp moves by buying or selling dollars, so the pair usually moves less than freely floating currencies. It matters to stock traders too: a falling rupee tends to go with foreign investors selling Indian shares.
Example
USD/INR going from 88.00 to 89.00 means a dollar costs about 1.1% more in rupees.
In practice
The rupee is a quick read on how foreign money sees India. Steady foreign buying of shares supports it; heavy selling, a strong dollar or a jump in oil prices weakens it, since India imports most of its oil.
Traders in export-heavy sectors watch it closely. Software and pharmaceutical companies earn in dollars, so a weaker rupee lifts their income, while companies that import fuel or parts are hurt by it.
What to watch for
Exchange-traded rupee contracts in India are meant for hedging a real currency exposure. Many offshore forex platforms marketed to Indian residents are not authorised; the Reserve Bank of India publishes an alert list of them.
Related terms
4 terms- Currency pairTwo currencies quoted against each other; the price shows how much of the second buys one of the first.
- RBIThe Reserve Bank of India: the country's central bank, which sets the repo rate and manages the rupee.
- FII and DIIForeign and domestic institutional investors: the two groups of large funds whose daily buying and selling is published for Indian markets.
- ForexTrading one currency against another, quoted in pairs like EUR/USD.