The side-effects of a firm rupee

The rupee has risen mainly on the back of FPI inflows

The rupee has gained 5.2 per cent versus the dollar since January, rising from Rs 68.23/dollar in early January to a current value of about Rs 64.65. At first glance, this makes little sense. The Federal Reserve has already hiked rates and signalled a willingness to hike again. Dollar bond market yields have therefore, risen. 

At the same time, rupee yields have eased, with the Reserve Bank of India (RBI) holding the policy rate stable and tightening the spread between the Repo and Reverse Repo rates. Hence, US bond market investors can expect to receive higher yields while rupee debt