Q3 Earnings Alert! Plan early for this week’s stock reports with all key data in 1 placeSee list

RBI's firm grip to keep rupee anchored in narrow range: Reuters poll

Published 08/06/2024, 09:07 PM
Updated 08/06/2024, 09:10 PM
© Reuters. FILE PHOTO: A worker checks a 500 Indian rupee note as a man fills diesel in containers at a fuel station in Kolkata, India, August 14, 2018. REUTERS/Rupak De Chowdhuri/File Photo
USD/INR
-

By Anant Chandak and Vivek Mishra

BENGALURU (Reuters) - The outlook for the Indian rupee has barely changed from last month as the Reserve Bank of India's interventions keep the currency, deemed expensive compared with its peers, in a tight range, according to a Reuters poll of foreign exchange analysts.

A sharp fall in global equities related to sudden liquidation of carry trades, where investors borrow in cheap currencies to invest in higher yielding assets elsewhere, pushed the rupee to an all-time low of 83.96 per dollar on Tuesday. 

The RBI's likely intervention in the FX market limited the currency's fall to 0.25%.

That trend was unlikely to change anytime soon as analysts in an Aug. 1-6 poll have barely changed their forecasts from a poll in July.

Median forecasts showed the rupee will trade at 83.55/$ and 83.40/$ by the end of October and end of January, respectively, from about 83.95/$ on Tuesday. It was forecast to gain about 1% to 83.00/$ in a year.

Fiona Lim, senior FX strategist at Maybank, said the rupee/dollar was a rather tricky pair to predict. "This is likely due in part to RBI's penchant to lean against the wind to reduce volatility."

"The main risk that threatens our forecasts (is) ... if there is too much scrutiny, possibly by the U.S. Treasury on the rupee (being) kept artificially weak. While that's not likely, a combination of higher-for-longer inflation and poorer (economic) growth outcomes for India could also threaten our outlook," Lim said.

The rupee's trade-weighted real effective exchange rate (REER) was 106.54 in June, according to the RBI's monthly bulletin, suggesting the currency is overvalued by more than 6%.

The partially-convertible currency has been the most expensive relative to its trading peers since December 2017.

"Domestic policy focus is to boost manufacturing and exports, for which one of the things that we may require is a slightly cheaper currency, but current account deficit trends have favoured a less undervalued currency," said Dhiraj Nim, a FX strategist at ANZ.

© Reuters. FILE PHOTO: A worker checks a 500 Indian rupee note as a man fills diesel in containers at a fuel station in Kolkata, India, August 14, 2018. REUTERS/Rupak De Chowdhuri/File Photo

"It is now in an overvaluation zone so the effect of policy intervention is to prevent further overvaluation of the currency now. As long as the RBI is keen on building up those reserves and occasionally utilising them to smoothen out the volatility, this process might very well continue."

(For other stories from the August Reuters foreign exchange poll click here)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.