Strong for one, is weak for the other.

"Trump believes that China and the European Union, among others, are manipulating their currencies to gain a competitive advantage over the US," wrote an editorial in the Mint. "The yuan has depreciated by over 5% since the beginning of June and some people may be tempted to believe that China is doing this to undo the damage being done by Trump's tariffs." But, the strength of the dollar is because of "rate hikes and normalization of the Fed balance sheet" and "Fiscal stimulus at this stage of the business cycle -- when the economy is growing at a healthy pace, inflation is picking up and the unemployment rate is low". Who cares? Trouble is that this is affecting the rupee. "The Indian rupee is at an all-time low and has fallen over 8% since the beginning of the year." This is bad news because imports account for 80% of our oil needs. Rising oil prices coupled with a weaker rupee will increase fuel prices and lead to inflation. The fall in the rupee is caused by a reversal in carry trades, selling by exporters and unhedged foreign currency debt. "Carry trade essentially involves borrowing in a currency where interest rates are low to invest in currencies where interest rates are high," wrote A Narayan. Inclusion in global bond indices will reduce volatility in the rupee. What should be the ideal exchange rate of the rupee? "A few weeks back, the vice-chairman of Niti Aayog, Rajiv Kumar, told reporters that the Indian rupee was overvalued by 5-7%," wrote Prof R Chinchwadkar. However, "Since the current value of the trade-weighted REER index is around 115, we see several experts claiming that the rupee is 15% overvalued." REER, or the real effective exchange rate, values the rupee against a basket of currencies whose weights are based on trade with those nations. The base was set at 100 in 2004-05. On the other hand, "A further adjustment for the hierarchy bias suggests that the rupee is undervalued by more than 10%." So the rupee has fallen against the dollar but we are not sure whether it is weak or strong. What about policies? We need to maintain "external" and "internal" balance, wrote SZ Chinoy. "To achieve 'internal balance' is to keep domestic activity and economic potential and inflation close to target. To achieve 'external balance' is to ensure any current account deficit (CAD) is sustainable, given the hard budget of external financing that emerging markets often come up against." "The recent run of data confirms both internal and external balances are coming under pressure." Chinoy recommends real depreciation of rupee,which will raise prices, with expenditure control to control inflation. With 8 months to go for election impossible to control expenditure. Back to square one.