Indian Rupee 10-12-24

Deeply Understood Currency Knowledge

India is PLUNGING and it’s Spreading to the Rest of the World

Jeff Snider said…

The Indian Rupee has been the canary in the coal mine for global crises— Here’s what it’s doing now

India’s rupee just fell to a record low and it has nothing to do with interest rates.

The Indian rupee has been intricately linked to everything Euro$ in the 21st century, coinciding with global dollar shortages including an exact match w/stocks from top to bottom 2007-09.

The rupee is a canary.

Despite conventional wisdom attributing currency behavior to interest rate differentials, the rupee’s movements have defied such explanations, showing a pattern of alignment with eurodollar cycles since 2007.

This unique relationship has made the rupee a canary in the coalmine, providing early warnings of looming financial challenges.

Rupee plunged again in 2011 due to Euro$ #2; Fed rates pinned at zero, INR declined anyway.

There was Euro$ #3 when again the current fit.

None of that was interest rates. In fact, during Euro$ #4 it was RBI’s Governor at the time, Urjit Patel, who spilled the beans. Patel even went so far as to write an op-ed in FT where he flat-out cited “dollar funding has evaporated” for the rupee’s plunge.

Because of this unique relationship where the rupee’s value is closely tied to eurodollar conditions, it has been repeated canary in coalmine for global monetary issues many times including collateral angles.

Here we are again in 2024 and INR continues to go lower and correspond with other signals. While everyone continues to be absolutely sure (again) the US soft landing is assured after a single payroll number, or following China’s “stimulus” Oprah-fest, India’s currency is yet another critical market betting the opposite way on both.