Authors: Mathew Joseph and Karan Singh, ICRIER

The sharp fall in US domestic consumption after the financial crisis has to be offset by a rise in net exports. For the US economy to recover then, the dollar must depreciate against the Chinese yuan. This devaluation is proving to be difficult, as the Chinese are resisting a yuan appreciation through massive intervention in the currency markets. The disastrous effects on the Japanese economy of the G7-managed appreciation of the yen in the mid-eighties have made the Chinese wary of a sharp appreciation in the yuan.

But while much focus is put on the US dollar’s depreciation against the yuan, what about the US dollar’s depreciation against the rupee?
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