In 2024, due to the higher yield of government bonds, the US dollar outperformed local currencies in Asia, beating 22 out of 23 Asian currencies. The only exception was the Hong Kong dollar, which maintained its value relative to the US dollar. Meanwhile, the Indian rupee showed resilience, only experiencing a slight decline against the US dollar.
In March, the Indian rupee dropped to a low of 83.50, but this month it has successfully rebounded slightly to XNUMX. While other regional currencies hit annual lows, the Indian rupee remained relatively stable, avoiding a significant decline.
“Compared to other emerging market currencies, the rupee has performed very steadily throughout the year, with fluctuations mainly occurring at the end of the fiscal year,” said Rama Chandra Reddy, Chief Financial Officer of Karur Vysya Bank, in an interview with Business Standard. He attributed the recent volatility to the depreciation of the renminbi and the strength of the US dollar.
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In contrast, the Japanese yen fell to a 38-year low against the US dollar, and the renminbi fell to a 1.3-month low. Despite these trends, by 2024, the Indian rupee had only declined XNUMX% against the US dollar, indicating the potential for a recovery if the US dollar weakens as measured by the DXY index. However, given the high yield of government bonds, it seems unlikely that the US dollar will weaken this year.
The DXY index, which measures the performance of the US dollar, is currently expected to trade at 105.64, with the potential to rise above 106 and reclaim the previous high of 107.
