Rupee makes making moves

The Reserve Bank of India left its key interest rate unchanged at 8% on Monday, the first pause by Governor Raghurum Rajan after hiking rates 75bps since September. Rajan certainly appears to be living up to the considerable hype since taking the job last year. In addition to introducing much needed reforms, Rajan has corralled CPI inflation to a two-year low of 8.1% Y/Y and stabilized India’s currency.

The Rupee was one of the worst performing EM currencies through the first three quarters of 2013 but has since rallied and even outperformed the JPMorgan EM Currency Index since January 1. Higher real interest rates obviously make the Rupee more attractive but Rajan’s steady-hand is giving confidence to foreigners investing in India.

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