The Indian rupee on Thursday hit its all-time low on Thursday, breaching 69 per dollar for the first time ever, making it the worst performing currency in Asia with a fall of more than 7% this year.
While the fall in the currency is good news for exporters, as they see higher returns from overseas sales, a continuing fall in the currency could raise risks of inflation.
JP Morgan economist Sajjid Chinoy however said India was not alone in facing pressures on its currency, and added that while all emerging market markets have come under some pressure, India is much more fortified than many other emerging markets.
"Understand the larger global backdrop, we have had a dollar that has strengthened almost 7 percent in the last 6 weeks both because of desynchronised global growth and because of fears of trade war. All emerging markets have come under some pressure, I would argue that India is much more fortified than many other emerging markets - as well as 2013," he said.
Chinoy also added that the fall in the rupee was a consequence of the trade disputes between the US and China.
"Six of the worst performing currencies against the dollar in the last 10 days are Asian. So, this is very much reflecting the regional fallout from a tariff ware between China and the US. That is the backdrop here," he said.
"If the dollar is strengthening and the CNY is depreciating, every other Asian country would want to follow suite. Therefore central banks have been permissive of this. In India’s case this is very much calibrated, no panic, we are in the middle of the pack, we have done better in the last 10 days than most current account surplus countries in the region, so there is no fear here," he further added, allaying fears of the drop being unexpected.
Chinoy however added that the risk was that the calibrated move could become disruptive if a continually strengthening dollar and a weakening renminbi lead to some capital flight out of China.
Echoing these sentiments, Alvin T Tan, currency strategist, Societe Generale SA, said the currency move was not particular to India.
“I do share the sentiment that the rupee decline is not particular to India certainly. There is a bigger, global macro move here in the dollar among emerging market currencies. So, if it does get a bit more manic as you say, it would be due to these global factors rather than Indian specific factors,” he said.
The rupee opened at 68.89 against the US dollar, slipping 28 paise from the previous close of 68.61.
The currency had hit an all-time closing low of 68.82 on 28 August 2013 while the all-time intraday low stands at 68.8625 seen on 24 November 2016.