It's tariff tantrum

"The Reserve Bank (RBI)...announced a series of measures to boost the Indian Rupee's role in global trade, promoting its use for cross-border settlements and reducing dependence on the US dollar." It will allow Authorised Dealer (AD) banks to lend Indian Rupees to non-resident Indians (NRI) in Bhutan, Nepal and Sri Lanka, establish transparent reference rates and a wider use of Special Reserve Vostro Accounts (SRVA). TOI. Vostro accounts allow foreign banks to open accounts in an Indian bank and trade in rupees without having any physical presence in India. cleartax.in. This is meant to reduce outflow of foreign currency and promote the rupee in international trade. Recently LG Electronics India Ltd raised $1.3 billion and Hyundai India raised $3.2 billion through initial public offerings (IPO) in their subsidiaries in India for repatriation to their parent companies in Korea. Korean multinationals raising money from Indian investors means that the rupee is going global, wrote TK Arun. There is already a long list of foreign multinationals trading on Indian stock markets (IPO Central), so how are these IPOs any different? And, how do they make the rupee an international currency? "On average, the rupee falls 2-3% against the dollar annually; in crisis years the depreciation is much higher." Now, as the rupee approaches 100 to one dollar "there is a sense that the rupee as a currency has collapsed. This is simply irrational." Mint. The rupee is trading at 88.81 to one dollar this morning. xe.com. On 26 June 2013, "The rupee...tanked by a massive 106 paise to close at all-time low of 60.72 against dollar on heavy capital outflows and month-end dollar demand from importers, even as RBI intervened to stem the currency slide." The rupee lost nearly 12% since May and 7% in June itself. TOI. By August the rupee had lost 20% of its value over the year to a new low of 68.7 to one dollar (BBC) but by 2014 it has strengthened to 62.33 to the dollar (bookmyforex.com). The 2013 crisis has been labeled the 'Taper Tantrum', which resulted from Federal Reserve Chair Ben Bernanke announcing his intention of reducing bond purchases, or quantitative easing, started during the subprime crisis (Investopedia) to flood markets with liquidity. This time it is Trump's tariffs. "The rupee had rallied to a peak of 87.6250 earlier this month following heavy handed intervention by the central bank, but has since shed those gains to once again hover close to its record low of 88.80." Reuters. "The Indian rupee fell yesterday but managed to hold above its all-time low on the back of intermittent dollar sales by state-run banks that also helped the currency end the month on a quiet note." Reuters. US President Donald Trump said that the US and India are close to a deal but India cannot compromise on its red lines. ET. The RBI is doing everything it can to hold the rupee above 90 to the dollar in the hope of a trade deal and removal of tariffs which will ease selling by foreign institutional investors (FII). If the rupee breached 90 to the dollar it may race to 100. Trump has nothing to lose and Prime Minister Narendra Modi cannot afford to be seen to lose. Good thing the rupee is not an international currency. It would have plummeted.