Rupee turned out to be one of the best performers in 2015 among all Asian and BRICS currencies, excluding yen.

The currency’s depreciation of about five per cent against the dollar was less than the losses of most of its other Asian peers. The Indian rupee fared better in 2014, when it weakened by only two per cent.

“The Indian rupee was caught between the leviathans like the U.S. dollar and China’s yuan devaluation and the erosion of rupee against the dollar continued relentlessly in 2015,” said Sugandha Sachdeva, currency strategist, Religare Secuitries.

However, the rupee fared much better despite a pullout by foreign funds from the emerging markets, including India, as an interest rate hike was expected from the U.S. Federal Reserve.

The currency was stable when the U.S. raised the benchmark interest rate and has actually strengthened against the dollar since then.

Its Asian counterparts like the Indonesian rupiah weakened by 11.30 per cent and the Thai baht depreciated 9.5 per cent against the dollar. Only the Chinese currency fared marginally better, losing only 4.6 per cent.

Among the BRICS nations also the Indian currency fared well. The Brazilian real depreciated 49 per cent against the dollar while the South African rand declined 34.75 per cent.

The Indian currency, which tumbled 12.4 per cent in 2013, started recovering in 2014.

Experts attribute the relative stability of the rupee to the improved macro-economic conditions.

“This has resulted from the RBI recouping foreign exchange reserves from the day Raghuram Rajan took over as governor of the central bank,” said Indranil Sengupta, chief economist, Bank of America Merrill Lynch. “He had announced a host of measures like FCNR-B deposits to attract inflows.”

The country’s foreign exchange reserves rose by more than $75 billion since the currency crisis of 2013. From about $274.8 billion in early September 2013, foreign exchange reserves rose to $351 billion as on 25 December, 2015.

In the two and half year since the currency crisis, the twin deficits – fiscal and current account - have narrowed. In 2013-14, the fiscal deficit was 4.5 per cent of the GDP, which is now seen at 3.9 per cent for 2015-16.

Similarly, the current account deficit in the first quarter of 2013-14 zoomed to a record high of 4.9 per cent of the GDP. CAD has since narrowed to 1.6 per cent of GDP during the July-September quarter of the current financial year and is expected to be 1 per cent of GDP in 2015-16, mainly due to soft crude oil prices.

Going into 2016, the rupee might gain initially, but is likely to weaken as the year progresses.

“From the technical standpoint, we expect the rupee to strengthen towards 65- 64.50 in the early part of 2016,” Mr. Sachdeva of Religare Securities said.

“But later we expect the rupee to depreciate up to 69 levels as we progress in 2016.” The rupee ended 2015 at 66.15 a dollar.