Falling rupee a double-edged sword for India, warn analysts

• India’s rupee hit fresh record lows amid warnings that benefits to exporters from a weaker currency would be offset by the higher price paid by Asia’s third-largest economy for oil.

• The rupee slit to 70.38 to the dollar just two days after crossing 70 for the first time as India got dragged into the turbulence of the Turkish financial crisis.

• The rupee has been steadily falling throughout 2018 after starting the year at 63.67.

• The weaker rupee will help India sell goods and its huge services sector in overseas markets, but the country is a massive importer of oil, securing more than two-thirds of its needs from abroad.

• Any boost to exports will be offset by pressures on inflation and the current account deficit, said the Association of Mutual Funds in India.

• Any optimism that the falling rupee would assist exporters should be tempered with caution, said the Federation of Indian Export Organizations (FIEO).

• South Africa, Argentina, Mexico, Brazil and Russia have all seen their currencies slip over the past week because, like Turkey, they remain heavily dependent on dollar-dominated foreign capital.

• India’s IT, services and leather exporters may benefit from a weaker rupee – but so do its competitors from their falling currencies.

• Analysts say high crude prices are squeezing the Indian currency, making it less appealing to investors.

• The fall in the rupee is leading to a widening of India’s current account deficit when the value of imports exceeds the value of exports.

• India’s central bank has raised interest rates twice this year, in part to help increase the value of rupee.

• But the currency can expect more fluctuations until the price of oil and economic conditions in emerging markets stabilize.

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