More problems ahead for the already collapsed rupee near all-time lows- Report

More problems ahead for the already collapsed rupee near all-time lows- Report

Report- More trouble ahead for the bruised Indian rupee


According to a Reuters poll, the collapsing Indian rupee will trade close to its lowest levels against the US dollar in the coming year and will remain vulnerable to a worsening trade balance and rate hike campaign by the US Federal Reserve.

Drenched with other emerging currencies against a strong dollar, the rupee has bottomed multiple times this year and has fallen by more than 7 percent in 2022.

A September 1-6 Reuters poll of 40 FX market analysts expected the rupee to fall to 80/$ in a month and stay there until the end of November, despite the RBI burning dollar reserves in an active defense of the currency since mayo. .

Although it was expected to recover slightly to around $79.74/end February and $78.50/end August, the expected 2 percent gain over 12 months would be much less than offsetting the 7 percent loss in a year.

Although the average showed a marginal recovery, nearly half of the analysts surveyed, 18 out of 40, expected the partially convertible rupee to be at 80/$ or break in six months to a new record. Fewer than 40 percent had expected this in an August poll.

said Brendan McKenna, international economist and forex strategist at Wells Fargo Assurance.

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“Disappointing growth momentum and slowdown in China is now growing on the RBI’s radar screen… which could exacerbate the sell-off over the next couple of months or so.”

When asked about the lowest point for the rupee against the dollar over the next three months, 19 analysts answering an additional question averaged 81, with a range of 80.00-83.34/$.

That was slightly weaker than the $80.50/$consensus in last month’s poll.

Nearly three-quarters of the majority, 41 out of 56, who answered another additional question said emerging market currencies will either depreciate marginally or significantly against the dollar over the next three months.

While India’s 13.5 per cent growth in the last quarter was the fastest among the major economies, it had little impact on the rupee as fundamental effects were mainly responsible for the strong explosion in growth.

Already shaken by high oil prices and stubbornly high inflation, the rupee is likely to weaken further if the Fed goes for another 75 basis points increase at its next meeting.

This move alone, which is likely to be followed by more hikes, will be more than a total of 60 basis points of rate hike expected from the Reserve Bank of India by the end of March.

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Inflated trade and current account deficits, which are set to deteriorate to their highest level in a decade, are also expected to put more pressure on the rupee.