A blog on financial markets and their regulation
Currency versus stocks
May 28, 2013Posted by on
In India we are accustomed to see the rupee and the stock market moving in the same direction as both respond to foreign investment flows. In recent weeks, the pattern has changed as a weakening rupee has coincided with a rising stock market. Another country with the same pattern is Japan where some commentators have argued that the pattern makes sense if foreign investors are hedging the currency risk while buying stocks. This is an interesting idea with potential relevance to India – foreigners can be long the private sector (equities) and short the government (currency).