US dollar may stay strong vs EM currencies, but rupee’s worst could be over
As of end-November 2024, the 40-currency trade-weighted Real Effective Exchange Rate (REER) stood at 108.13—the highest on record—indicating that the Rupee was significantly overvalued.By end-April, the REER had corrected to 100.80, suggesting the overvaluation had already been addressed. That’s the latest available data, as per the RBI bulletin. However, since then, the Rupee has underperformed its Asian peers.It has been the worst performer—weakening 1.3% against the Dollar—while the offshore Yuan has appreciated 1.1% during the same period.Other Asian currencies have gained between 0.4% and 7%. Based on this trend, the...