Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.04 per cent lower at 103.17. Global oil benchmark Brent crude futures fell 0.66 per cent to USD 122.26 per barrel. RBI raised its key repo rate by 50 basis points on Wednesday.įoreign funds have sold stocks worth more than $23 billion so far in 2022 while they are net sellers of $2.1 billion in debt. Indian shares continued to incur losses to a fifth session as investors worried that aggressive policy tightening by central banks could stifle global economic growth. India imports nearly 85 per cent of its oil requirements and high crude tends to push up domestic inflation while also widening the country’s trade and current account deficits. ( ).According to Reuters, which has quoted traders, the rupee could weaken towards 79/dollar levels by end of fiscal year 2022/23 but the fall could be accelerated by firm crude oil prices. If yet again RBI manages the pair below 77.80 and offers a rate hike as expected, we might see rupee coming back to 77.10-77.40 levels.”Ĭopyright © 2022 Khaleej Times. “However, RBI with its pile of $600 billion reserves has done a fabulous job in curbing the volatility and preventing the pair to break past 77.80 levels for over a month. “We have been a little more bearish than consensus because we think the underlying balance of payments dynamics have deteriorated quite significantly,” said Divya Devesh, head of Asean and South Asia forex research at Standard Chartered, Singapore.Īmit Pabari of CR Forex Advisors said an elevated dollar index, inflated crude oil, FII’s outflows, and a rise in bond yields have mounted pressure on the rupee. It’s a very modest adjustment of a currency with deteriorating fundamentals,” Arora said in a report.Ĭurrency pundits say surging crude prices, pullout by foreign portfolio investors from Indian equity markets, broad dollar strength, and firm US bonds are among the reasons for weakness in the rupee.Īnalysts argue that since the underlying fundamentals of the Indian economy have deteriorated, the rupee’s further plunge is unstoppable in the near term. “Nor do I think 80 is a runaway depreciation by any metric. Rohit Arora, the emerging markets Asia strategist at UBS, said “a grind higher for USD/INR from here toward 80 in the next couple of months is not a big ask” as higher oil prices threaten to widen India’s current-account deficit to at least 3.0 per cent of the gross domestic product, compared to a 2.0 per cent sustainable level. Standard Chartered also sees a similar level by the third quarter. At 22 per cent, the FPI shareholding in India’s top listed companies sank to at least a six-year low in March after five successive quarters of decline.”īloomberg Economics predicted that the rupee would fall to 81 a dollar by the end of November while Nomura Holdings said the currency would cross 79 by the end June. “This protracted exodus, the longest since the 2008 subprime crisis, is visible across companies and sectors. ![]() ![]() So far this year, the greenback is up over 4.4 per cent against the rupee.Īccording to analysts, with a flight of nearly $23 billion out of India since October 2021, the nervousness of foreign portfolio investors (FPIs) is quite palpable in the stock markets. It is currently at 77.66 a dollar, after hitting a low of 77.92 last month. ![]() The rupee declined about 1.6 per cent in May, the biggest drop among emerging Asian currencies. Forwards are also pricing in a similar weakness for the rupee despite the assurances by the RBI Governor Shaktikanta Das that the apex bank won’t let such a runaway decline happen. The forecasts by experts from UBS AG, Nomura Holdings, and Bloomberg Economics show that the rupee, one of Asia’s worst-performing currencies, dropping as much as 4.0 per cent from the current level of Rs77.66 against the dollar in the backdrop of deterioration in India’s external finances. The rupee, which has been battered by a persistent surge in foreign fund outflow, a strong dollar, and widening deficits due to a record oil price spike, is facing further headwinds in spite of the actions taken by India’s Reserve Bank to stem its freefall, they said. The Indian rupee could further plummet to as low as Rs81 per dollar, or 22 against dirham, in the next five to six months, currency experts and analysts warned.
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