predictive powers on where rupee is heading

Here's what was predicted in July 2011: Rupee will reach 40 against dollar next year. This is just one for instance; there were several such predictions. Dec 2011: Rupee sheds 7% in November; worst fall in 16 years. Now, 2013: Why some brokerages see rupee hitting 70. 

You see, when opinions are sought; they are given. Sure, they are given away free too, even when not asked for. Such is life for the attention seekers, I reckon. 

Now, what will happen to the rupee in future? Can we genuinely predict? I doubt, for we do not have any better predictive powers than an average person on the street on such matters. Having said that a person who has studied what impacts currency rates might have something to say about why it happened the way it did; of course, all this is with the power of hindsight. 

Currency rates move, as other prices do, based on demand and supply. Causes of demand and supply could be different at different times, but ultimately it is dd and ss that decide the prices. A housemaid who buys groceries regularly would be able to tell this. 

These days, less people (including the institutions) are buying rupee than before; and more are selling it than before. Consider this: 

Foreign direct investments and dollar inflows in the stock market have drastically come down; the dollar has moved away from India; they have sold the rupee and collected their dollars back; more and more of this, and the rupee will fall.

The people of India love gold which is paid for in dollars; the more they buy it, the more rupee is sold. Furthermore, India needs oil both for its survival and growth; and it buys a lot of it; when it does that a lot of rupee is sold. 

Moreover, India does not have world-class products and services in a meaningful sense where the dollars are ready to flow in exchange for those products and services on a regular basis; It is no US or China.

Then there are other inflows of dollars in the country for capital and other requirements; these impact the rates too; when the inflows go down (and/or earlier remittances go back home), the rupee is sold to make way for it. 

And when the combined effects of these nuances take place on a continuous basis, lots and lots of rupee is sold; demand for the dollar gets higher and for the rupee lower; and presto, the rupee will fall; and it did.

The long-term dollar-rupee past - 1973-2013:

As we can see the rupee has depreciated a great deal against the dollar over the years.

Now, if you ask me what will happen to the rupee in future, I have no answer. However, if the government takes the right measures in terms of dealing with its fiscal deficit and current account deficit, something better should happen. 

Just a few: Curb the demand for gold; expedite policy and approval matters, especially to produce more oil and gas at home; create conducive environment for investments; create jobs.

Will this happen? Why don't we wait to see it?