Bengaluru: Rupee Will trade near its all-time low in three months, according to a Reuters poll, widening the trade and current account deficit, where nearly one in three analysts expected a weakening to 80 per dollar by September.
A global stampede, turning the US dollar into a safe haven on rising risks of a global slowdown, pushed the Indian rupee to a record low of 79.40 against the greenback on Tuesday.
While the Reserve Bank of India’s intermittent dollar selling helped limit losses, higher global crude oil prices and steady capital outflows have widened its current account deficit, leading to a fall in the rupee.
But the worst is still not over.
While a July 1-6 survey of over 40 forex analysts showed that the rupee is now expected to trade around 79 per dollar by the end of September, almost a third of the respondents expect it to trade around 80 against the dollar. Will be at a new all-time low. or more.
When asked what would be the lowest point of the rupee against the dollar during the next three months, 21 analysts answering an additional question gave an average of 80 with a range of 79.50-85.00/$.
“We are now living in a volatile and high-risk environment where forecasts are all about scenarios and with US inflation (rate) not showing signs of peaking yet, the Fed is likely to give another 75 basis point hike.” Chances are, not a good sign for the rupee,” said Sakshi Gupta, principal economist at HDFC Bank.
“The momentum we have seen in the rupee is indicating that the global pressure is very high with market downturn, dollar rally, foreign capital outflows, as well as extreme volatility in oil and commodity prices.”
While India remains the fastest growing major economy, a weak rupee, stubbornly high inflation, high oil prices and the Russo-Ukraine war pose the biggest downside risks.
As the US Federal Reserve continues with its aggressive tightening cycle, the rupee may face a bumpy ride. Foreign investors have already pulled out $13 billion from Indian stocks this quarter, the largest since 2008, taking the total outflows so far in 2022 to over $30 billion.
Prithviraj Srinivas, Chief Economist, Axis Capital said, “There are currently two forces in the rupee. Commodity price shock on one hand is worsening your trade deficit and capital outflow on the other.
“If you look at the position of our current account deficit, we see the potential to double from last year.”
RBI Governor Shaktikanta Das has repeatedly said that the country’s current account gap is manageable.
The June trade deficit widened to a record high of $25.63 billion, after crude oil and coal imports increased by $9.61 billion a year ago.
A global stampede, turning the US dollar into a safe haven on rising risks of a global slowdown, pushed the Indian rupee to a record low of 79.40 against the greenback on Tuesday.
While the Reserve Bank of India’s intermittent dollar selling helped limit losses, higher global crude oil prices and steady capital outflows have widened its current account deficit, leading to a fall in the rupee.
But the worst is still not over.
While a July 1-6 survey of over 40 forex analysts showed that the rupee is now expected to trade around 79 per dollar by the end of September, almost a third of the respondents expect it to trade around 80 against the dollar. Will be at a new all-time low. or more.
When asked what would be the lowest point of the rupee against the dollar during the next three months, 21 analysts answering an additional question gave an average of 80 with a range of 79.50-85.00/$.
“We are now living in a volatile and high-risk environment where forecasts are all about scenarios and with US inflation (rate) not showing signs of peaking yet, the Fed is likely to give another 75 basis point hike.” Chances are, not a good sign for the rupee,” said Sakshi Gupta, principal economist at HDFC Bank.
“The momentum we have seen in the rupee is indicating that the global pressure is very high with market downturn, dollar rally, foreign capital outflows, as well as extreme volatility in oil and commodity prices.”
While India remains the fastest growing major economy, a weak rupee, stubbornly high inflation, high oil prices and the Russo-Ukraine war pose the biggest downside risks.
As the US Federal Reserve continues with its aggressive tightening cycle, the rupee may face a bumpy ride. Foreign investors have already pulled out $13 billion from Indian stocks this quarter, the largest since 2008, taking the total outflows so far in 2022 to over $30 billion.
Prithviraj Srinivas, Chief Economist, Axis Capital said, “There are currently two forces in the rupee. Commodity price shock on one hand is worsening your trade deficit and capital outflow on the other.
“If you look at the position of our current account deficit, we see the potential to double from last year.”
RBI Governor Shaktikanta Das has repeatedly said that the country’s current account gap is manageable.
The June trade deficit widened to a record high of $25.63 billion, after crude oil and coal imports increased by $9.61 billion a year ago.