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Does the devaluing of China's currency positively or negatively affect India's economy in terms of trade?

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posted Dec 5 by Kavana Gowda

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Predicting what might happen in the currency markets is very difficult. The Indian currency has depreciated against the US dollar since the devaluation of the Chinese yuan earlier this month, but not by as much as other currencies in the region.

One argument is that emerging market currencies like the rupee must adjust to a lower yuan in order to make their exports more competitive and compete with Chinese goods.

For India, a weaker currency means its goods are cheaper overseas - but it also means the cost of raw materials - like oil - goes up. Currently India is enjoying the benefits of a low oil environment and it looks like it will stay that way for some time to come, but the bigger concern is over what the impact of a weakened Chinese currency might do in the longer term, and whether its devaluation may trigger the start of a global currency war.

answer Dec 6 by Babita Thawani
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