It's over a year now, since i started tracking the US dollar index movement in Bloomberg (http://www.bloomberg.com/apps/cbuilder?ticker1=DXY%3AIND). The US Dollar Index (USDX) is an index (or measure) of the value of the US dollar relative to a basket of foreign currencies (weighted geometric mean of the dollar's value compared only with Euro (EUR), 57.6% weight; Japanese yen (JPY), 13.6% weight; Pound sterling (GBP), 11.9% weight; Canadian dollar (CAD), 9.1% weight; Swedish krona (SEK), 4.2% weight and Swiss franc (CHF) 3.6% weight).
Supported by various economic and financial stability programs (like TARP, TALF, etc) by US government; the index hit the peak level of 88.9 in March-09. USDX touched low at 76.4 post Lehman collapse (Sept-08). During the course of the year, a series of quantitative easing measures followed by printing currency must have plunged the index further to 74.8. It is expected to go down unless resurrected by financial stability measures.
Turning to Indian scenario, INR/USD was extremely volatile in the past year. Led by rupee depreciation, the exchange surged to Rs 52 per US $ in March-09. Thanks to the pro-active easy money policy measure by RBI, but for which, the Indian economic experience last year would have been traumatic. INR/USD is tending close to stability levels at around Rs 46 per US $. We must not rule out the fact that dollar depreciation globally improves the chances of INR/USD marching below Rs 46 to as close as $ 40-42.
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