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

Indian rupee outlook worsens on trade war, growth risks: Reuters poll

Published 06/06/2019, 12:09 AM
Updated 06/06/2019, 12:10 AM
© Reuters. FILE PHOTO: Illustration photo of an India Rupee note

© Reuters. FILE PHOTO: Illustration photo of an India Rupee note

By Indradip Ghosh and Shrutee Sarkar

BENGALURU (Reuters) - The rupee will fall further against the U.S. dollar over the next 12 months than previously thought, hit by slowing growth momentum and an escalating global trade war that has recently threatened to engulf India, a Reuters poll found.

The currency moved only marginally against the dollar in May despite a steep fall in oil prices, the country's major import, and a landslide victory for Prime Minister Narendra Modi's Bharatiya Janata Party, something previous polls had said would be the best outcome for the rupee.

Last year, a deep sell-off in emerging markets and a widening domestic fiscal deficit, exacerbated by rising oil prices, pushed the rupee down nearly 9% and that weak trend is not expected to change over the coming year.

A trade conflict between the United States and China, which shows no signs of being resolved anytime soon, will probably put further pressure on risky assets like the Indian currency.

The May 30-June 5 survey of about 50 strategists forecast the rupee to weaken over 2% to 70.65 per dollar in the next 12 months from Wednesday's 69.23. It is up 0.7% year to date.

"We expect the Indian rupee to keep depreciating through the rest of the year, given a higher risk-off sentiment around trade tensions, limited portfolio inflows, slower domestic growth and stretched valuations," said Rini Sen, India economist at ANZ.

"We expect the rupee to recover in 2020, once the combined effect of easy liquidity and monetary policy supports a revival in overall growth."

The latest consensus for 12 months ahead is a slight downgrade from May's poll and nearly 60% of the 30 common contributors from the previous poll with a year-ahead view have either lowered their outlook or kept it unchanged.

Most emerging markets currencies' outlooks were lowered in the latest Reuters polls, under threat from U.S. President Donald Trump's plan to impose tariffs on more imports.

The rupee will also take a hit as the U.S.'s preferential trade treatment for India ceased on Wednesday.

"It looks like India is potentially the target for the trade war and if that is the case, we will see INR continuing on a weakening trend," said Prakash Sakpal, Asia economist at ING.

© Reuters. FILE PHOTO: Illustration photo of an India Rupee note

The latest poll was taken before the Reserve Bank of India's rate decision on June 6, where it is widely expected to cut rates due to an economic slowdown and muted inflation, another factor likely to hurt the rupee's performance. [RBI/INT]

(Polling by Khushboo Mittal and Anisha Sheth; editing by Ross Finley & Shri Navaratnam)

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.