Go read Dune. Their entire community functions on water as a currency.
The properties you highlighted are true of any currency, even silver and gold backed currencies.
Take a look at the Spanish economy after the discovery of Silver in their South American Empire. It completely devalued their currency (sudden upswing in silver availability). And its not like people make jewellery out of silver, or computers out of gold - thus reducing the publicly available pure resource, even when those countries currency were backed by it.
As a comparison, today we use collections of bits (aka BitCoin and other crypto currencies) as stores of wealth. As a currency those bits hold worth because of provable work. YouTube's 3Blue1Brown has a decent visual video on it.
- Everyday new bitcoins are being minted out of nothing but being the first to complete the next piece of work.
- Individuals loose their cryptographic keys due to a host of environmental reasons, effectively deleting coins from the economy.
- Also its relative scarcity and fixed volume does tend to swing its open-market value up and down.
In your water-currency driven world, every individual would be intimately aware of how expensive they are. They would take steps to conserve that wealth, much like a modern family attempts to conserve their money by choosing cheaper services, or improving their home with solar panels.
- Homes would be built around water tanks. Both to collect dirty water for purification, but also to buffer them from a water shortage.
- Homes would either have built in purifiers, or be attached to a community purify that exchanged fresh water for it. Home Gardens would be favoured both because of food prices, but for water recycling too.
- Cities would (like today) operate massive water reservoirs. Though they would be made much more water tight, and probably under grounded.
- Some cities might even enclose, by dome or being subterranean to capture water expelled by people walking in them.
- Corporations would attempt to sway water prices in their favour, but water alone does not keep a human alive. There is building, growing, manufacture, mining, and other support services needed keep people alive, healthy, protected, and productive. So unless one company manages to monopolise all of this, the market power will be somewhat distributed.