The rupee’s outperformance last month that turned it into Asia’s best performer may be indicating the central bank’s higher tolerance for a stronger currency with the focus on curbing imported inflation, analysts said. Global crude oil prices have surged more than 25% this year and that along with commodity prices near record highs poses a risk to inflation in a net oil importing nation. Though, in August last year, when the rupee gained 1.6%, it said a stronger currency helps in containing imported inflation. A 1% move in the exchange rate translates into a 15 basis point change in headline inflation, according to the RBI study. India’s wholesale prices accelerated at the fastest pace in more than a decade in April, while core inflation also remained sticky above 5%.

Source: Mint June 01, 2021 09:06 UTC