Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

No peace for India's rupee as mighty dollar thunders on: Reuters Poll

Published 10/06/2022, 10:08 PM
Updated 10/06/2022, 11:30 PM
© Reuters. FILE PHOTO: A man counts Indian currency notes inside a shop in Mumbai, India, August 13, 2018. REUTERS/Francis Mascarenhas/File Photo

© Reuters. FILE PHOTO: A man counts Indian currency notes inside a shop in Mumbai, India, August 13, 2018. REUTERS/Francis Mascarenhas/File Photo

By Arsh Tushar Mogre and Devayani Sathyan

BENGALURU (Reuters) - India's rupee will trade near its record low against the mighty greenback beyond this year, buffeted by rising oil prices and an aggressive U.S. Federal Reserve rate-hiking campaign, according to a Reuters poll of FX strategists.

Steamrolled by the Fed-pumped dollar, the rupee has fallen over 10% this year and reached an all time low of 82.22/$ on Thursday, even though the Reserve Bank of India continues to sell its forex reserves to defend the local currency.

While it found brief respite after the RBI delivered its fourth consecutive interest rate hike last week, a widening trade deficit driven by rising oil prices and a slowdown in exports have dragged the rupee down.

That downward trend is unlikely to reverse anytime soon, according to the Oct. 3-6 Reuters poll of 40 FX analysts which showed the three month median forecast for the currency at 82.00/$, near where it was trading on Thursday.

But the median view of 19 analysts who answered a separate question showed the rupee would fall as low as 83.00/$ before year-end. Forecasts ranged between 82.00-84.00/$.

The rupee was then expected to recover just about 0.7% to trade around 81.30/$ in 6 months and 80.50/$ in 12 months, still not far from its record low. That lines up with expectations in a wider poll for the dollar's dominance to continue beyond 2022.

Although the median consensus showed a marginal recovery in six months, about 25% of strategists, 10 of 39, forecast the partially-convertible rupee to touch 82.5/$ and beyond. None predicted that in a September poll.

Asked what was the best approach to strengthen emerging market currencies against the dollar over the coming six months, around 40% analysts, 18 of 45, said central banks needed to hike interest rates more aggressively. Slightly under one-third said there was nothing that could be done.

Just over 10% of economists suggested central banks should continue selling their dollar reserves.

The RBI has already spent nearly $100 billion of its previous $642 billion pot of dollar reserves and was expected to deplete it to $523 billion by end-2022 to prop up the rupee, a separate Reuters poll showed.

"With FX reserves slowly being run down and dollar strength causing the rupee to go past 80.00/$, FX reserves will be used as "sand in the wheels" to slow the pace of exchange rate movements, rather than protecting any levels," said Sajjid Chinoy, chief India economist at J.P. Morgan.

© Reuters. FILE PHOTO: A man counts Indian currency notes inside a shop in Mumbai, India, August 13, 2018. REUTERS/Francis Mascarenhas/File Photo

"The response to global pressures – so far borne largely by FX reserves – will, from now on, be more equitably shared between reserves and interest rates."

(For other stories from the October Reuters foreign exchange poll:)

 

 

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.