Indian Rupee (INR) appreciated to 11-month high to become the best performing currency in Asia-Pacific region against US dollar in 2014. The Rupee on 23 May 2014 closed at 11-month high of 58.52 against the US dollar.
In the past one month, the Indian Rupee has gained 5.3 percent in value vis-à-vis the US dollar.
The 5.3 percent increase in the value of Indian rupee vis-à-vis US dollar was ahead of other Asia-Pacific peers like Indonesian Rupiah and New Zealand dollar.
The Indian Rupee stood at 61.80 against the US dollar at the start of 2014 and since then it has recorded a gain of 327 paise in less than six months partly due to foreign fund inflows. The gain is a major turnaround since August 2013 when Rupee touched its life time low of 68.80.
The main reason for the appreciation of rupees is due to increase of Capital inflows and formation of new government which raises the hopes of big-bang reforms to revive the economy.
In Asia-Pacific, Indian Rupee is followed by the Rupiah (Indonesia) which has appreciated 4.6 percent, New Zealand dollar (3.75 percent) and Australian dollar (3.55 percent).
The Yen (Japan), the Won (South Korea) and the Ringgit (Malaysia) has gained between 2 to 3 percent in 2014 so far.
Philippines’s Peso has appreciated 1.6 percent against the US dollar, and a small increase of 0.5 percent in Baht of Thailand and Singaporean dollar.
Hong Kong dollar is almost unchanged whereas Taiwan dollar and Chinese Yuan have lost the value.
Appreciation of Currency
Appreciation of Currency means increase in the value of one currency in terms of other currencies. Currencies appreciate against each other for various reasons, including capital inflows and the state of a country’s current account.
Effects of Appreciation
• The international trade of country (exports and imports), a weaker currency will stimulate exports and make imports more expensive, which decreases the trade deficit of the country (or increasing surplus) over a period of time.
• Foreign capital will flow into countries that have strong governments, dynamic economies and stable currencies. That is stable currency to will attract investment capital from foreign investors.
• The Inflation of the country may increase because devalued currency can result in imported inflation for countries that are substantial importers.