Indian currency depreciated sharply in last few trading sessions, which has lent support to domestic steel prices. On one hand, imports will get expensive, on the other, exporters will get better realizations.
Indian currency fell close to 66 against USD, which was last seen in September, 2013. During that time steel prices in Indian domestic market rose sharply.
Devaluation in Chinese Yuan has put pressure on other currencies. However, Indian rupee is still among the world’s top 5 best-performing currencies since the beginning of this year. Year-to-date, INR has depreciated by less than 4%. It is nothing when compared to the depreciation in other currencies like Russian Ruble, which depreciated by 17% in a month.
A falling currency can be inflationary as it raises import costs. However, fall in domestic inflation coupled with sharp price correction in global crude oil has lessened the threat for steel manufacturers.
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