DH Poll: Rupee seen testing 79-level by December

Fed action, Ukraine war fallout seen hurting the currency further
Last Updated 11 May 2022, 15:54 IST

The Indian rupee, which touched an all-time low against the dollar earlier this week, is likely to depreciate further and settle at 79 by the end of the year, according to a majority of the dozen currency analysts polled by DH.

Most of them blamed the US Federal Reserve’s first post-pandemic interest rate increase by a half percentage point last week and planned hikes in coming months to fight inflation for the pressure on the rupee. The Fed’s action strengthened the dollar, made investors move away from riskier assets and pull their money out of Asia’s No. 3 economy, hurting the rupee.

"Going forward, we might see broad weakness in the rupee along with other emerging market currencies. The Fed might be very aggressive in the coming meetings in order to curb inflation at 40-year highs and might hike rates by 50 basis points in June and July meetings. We could even see a much higher rate hike if inflation crosses two digits, according to Jigar Trivedi, Research Analyst- Commodities Fundamental, Anand Rathi Shares & Stock Brokers.

Some others fretted over the rise in crude oil prices tied to the Russian invasion of Ukraine and the lingering effects of the war on India, which is the world's third-largest oil importer. The sharp surge in oil prices has already pushed up inflation and widened its current-account deficit. A current account deficit indicates that a country is importing more than it is exporting.

“Crude oil prices will have a major impact on the rupee. Crude oil prices might not cool down even after the Russian war ends because sanctions might not ease out,” said Ritesh Bhansali, Vice-president at Mecklai Financial Services Ltd.

Some others such as Jateen Trivedi, VP of Research at LKP Securities, pointed out that the pressure on the rupee would reduce only if the dollar index, which measures the greenback against six major currencies, cooled off.

Most analysts expected the rupee to have a bumpy ride for the next seven months, with some seeing things change for the better next year.

“The Indian rupee has declined nearly 4% against the US dollar since the start of the year,” said Sugandha Sachdeva, Vice President - Commodity and Currency Research, Religare Broking. “From a one-year perspective, we expect the Indian rupee to reverse course and consolidate around the 76 mark,” said Sachdeva.

(Published 11 May 2022, 15:54 IST)

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