Weakening Yuan creates for Indian rupees and raises concern for depreciation risks.
The Indian rupee may face problems, and recent gains may be short-lived as depreciation pressure mounts on the currency as Trade Rival China loosens its grip on the Yuan.
The weakening of the Chinese currency is major competition for all Asian currencies, as they all have trade links with China. While recently Indian currency has performed well and has gone up to its highest level since May 2023.
The Reserve Bank of India was ready to let the rupee weaken in line with the yuan after Donald Trump won the US elections last year.
The yuan has declined by 0.6 percent against the dollar this month, which is the most among Asian economies, followed by the Indonesian rupiah and the rupee, which have fallen by 0.1 percent during this period.
The biggest challenge for the economies right now is handling the tariff crisis, and China, being one of the highest-tariff-imposed countries, looks to reroute its products. Concerns rise for India as the biggest trade deficit of India is with China, as their major imports are microchips, chemicals, and solar panels.
RBI Governor Sanjay Malhotra reiterated last week that the central bank will intervene in the FX markets should volatility be excessive or disruptive. This came as the central bank further lowered its key rate to lift India’s economic growth, potentially putting further depreciating pressure on the rupee.
(SUBHAM)
