How ’bout that Indian rupee?

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Time‘s man in New Delhi, Simon Robinson, has an article on that deserves some more attention than it’s been getting. He writes:

As U.S. politicians line up to bash Beijing for its weak currency and gigantic trade surplus, one message they might want to offer their constituents is, buy Indian. Unlike China, Asia’s other emerging giant has allowed its currency to appreciate almost 9% against the greenback since January. You might not have heard much about that in the U.S. — where total imports from India last year amounted to $22 billion, compared with $288 billion from China — but in India the rupee’s appreciation is one of this year’s biggest business stories, as exporters and labor groups scream that the strong currency will mean lower profits and fewer jobs.

So, what’s going on? The rupee exchange rate is neither completely free-floating nor fixed, but is “managed” by the Reserve Bank of India through buying and selling other currencies. Up until April, the Reserve Bank was buying lots of U.S. dollars — perhaps as much as $24 billion in the previous six months — to keep the rupee at around 44 to the dollar. But with investor sentiment so hot on India and money pouring in from abroad — international investors have bought more than $7.5 billion worth of Indian stocks so far this year, compared to $8 billion in all of 2006 — the Reserve Bank found itself having to spend more and more on foreign currencies just to keep the rupee stable. When inflation shot up to over 6% in April, Bank officials appeared to decide — they never comment explicitly on such matters — to stop buying dollars. The result was, over the next couple of months, a strengthening of the rupee to close to 40 to $1. Read more.

This sharp rise is obviously causing some problems for Indian exporters. But still, what great evidence of the dramatic shift in the country’s fortunes over the past few years. I went to the Federal Reserve’s historical FX page, downloaded the rupee/dollar exchange rate since 1973, and got’s Feilding Cage to make it into a pretty chart. Check it out: