Rupee weakness unlikely to concern policymakers

The recent weakness of the rupee, which has fallen by more than 1.5% against the US dollar in the past couple of weeks, is unlikely to worry policymakers. For a start, the fall in the rupee is a reflection of the general strength of the US dollar. The rupee's losses have been small compared to other major EM currencies. In addition, some weakness in the rupee is likely to be welcomed given the poor performance of exports over the past few months. Looking ahead, India’s lower external vulnerabilities mean a sharp sell-off like the one seen in 2013 is unlikely, even as the US Fed begins to tighten policy.