Rupee and the Dollar - cat and mouse game?

Not breaking news anymore, but the rupee is at an all-time high with respect to the dollar. So what.....?

# Well for starters, if you work in an software outsourcing company like Wipro, TCS, Infosys to name a few, or hold their stocks you would have felt some pain :-). These guys earn in dollars/euro etc but their costs/wages are in rupees. So if the rupee gets stronger, it eats into their margins.

# If you are thinking of retiring in India you would have seen your net worth take a 10% haircut.
And there's a double whammy - In an ideal scenario, lets say we have country I (India) with Inflation of A% and country U (USA) with inflation of B% and A is much larger than B and growing, then currency of U should appreciate against currency of I to offset the inflation (A-B). But look at the dollar - its going in reverse.

Where the rupee is headed in the future I don't know, but I believe the software lobby is too strong to let the dollar keep sliding. India will lose the "low cost" advantage that started the growth story that is India today. I'm sure the outsourcing bigwigs have had "talks" with the RBI to intervene (read buy forex to stop the dollar slide). Now, what was the compromise number that they agreed upon - 39, 40, 41 - time will tell :-)

So what can you do to hedge against the falling dollar (not only wrt to the Rupee, but other currencies as well)?

1) Invest a part of your portfolio in International Mutual funds. These funds will rise in value when the dollar falls (over and above the appreciation of the underlying equity)
2) Invest in commodities