Indy Telecom & Industrial Media

I found this interesting article that talks about how hedge funds in India part-take in currency arbitrage. From the article –

Hedge funds - known for their high-risk, high-return short-term investment plays - are taking bets on the upward and downward movement of the rupee against the dollar under the pretext of investing in equities.

As one of my friends recently commented, this is probably a good time to invest in the USD, since it seems to be at an all-time low. While there are speculations that it may go still lower, you can always rely on the various national reserve banks to peg the dollar before it goes down too low.

Last June and early July, most analysts said the rupee could not continue appreciating and the RBI would intervene to ensure that the rupee corrects a bit. This view was shared by many foreign brokerage houses as well.

The RBI did intervene, but only to stop the rupee from appreciating further. The hedge funds also believed that the rupee would fall against the US dollar.

Of course it did. You know, it just might make everyone’s life easier if RBI allowed free dollar convertibility within India. When will these people learn?