evidence: However, 2022 was different (relative to 2013 and 2018) wherein the Indian currency was either stable or outperforming other major currencies like the British pound, euro and Japanese yen. Therefore, the decline was largely a function of a strengthening U.S. dollar: with the Dollar index (DXY) going from ~95 to a peak of ~113. This increase suggests that the Indian currency should have depreciated more than ~10%. Further, the rupee was roughly flat (down ~0.8%) in 2023 when the Fed continued to hike (an additional 100bps). While the RBI cushioned the decline by selling down their dollar reserves (which were reduced by ~$70bn in 2022), it mainly showed the tremendous resilience of India’s economy. Careful management of government finances during COVID, a robust recovery and strong capital account inflows (FDI + FII) contributed to this. [...] On the whole, demand for the rupee will remain strong as India grows in importance as a key investment destination for foreign portfolios. Further, the RBI’s Forex reserves (now $680bn+) offer an important buffer to the currency. These factors have begun presenting themselves in INR/USD currency markets with record-low FX volatility translating into decade-low hedging costs.