Strong Rupee Concerns Exporters and Buyers
March 28, 04
The impact of the strengthening of the Indian rupee may be limited in the short run but foreign buyers of diamonds and jewelry are nonetheless watching the situation closely and may eventually be forced to buy from other markets.
Indian exporters are also concerned about the appreciation of the rupee against the U.S. dollar and some exporters have moved to invoicing in euros to reduce the impact, according to analysts.
The rupee has strengthened by around six percent against the dollar in the last year and with more than 85 percent of India’s exports invoiced in dollars, exporters stand to lose out to neighboring countries.
The rupee rose to a 44-month high of 44.74 to the dollar last Wednesday and is currently at 44.48.
The Federation of Indian Export Organizations has issued a warning that export growth could drop to single digits if the strengthening rupee is not curbed.
The Indian currency’s strengthening is not bad news for everyone, however. For gem and jewelry exporters, who import their raw materials, the rupee’s appreciation is good news since it means lower import costs.