Indian Rupee Is Set To Rebound From Near Record Low, Says Citigroup
Indian rupee may rebound to as strong as 80 per dollar as easing crude prices and rising services exports also help narrow the country's current-account deficit, according to Citigroup
From near an all-time low, the Indian rupee is set to bounce back as the Reserve Bank of India (RBI) slows its dollar purchases, said Citigroup Inc. According to a Bloomberg report, the Indian rupee may rebound to as strong as 80 per dollar as easing crude prices and rising services exports also help narrow the country's current-account deficit, said Aditya Bagree, head of markets for India and South Asia at the bank in Mumbai.
Bagree, who has spent over a decade at Citibank, said, "We are constructive on the rupee in the short term. There are almost 11 months of import cover, and hence from here, the Reserve Bank of India may slow the pace of accumulation."
The news agency reported India’s currency has weakened about 0.9 per cent this month, closing at 82.5713 per dollar last week as the prospect of higher US interest rates boosted the dollar. That put the rupee less than 1 per cent away from its all-time low of 83.2912 set in October.
One reason that has kept the rupee under pressure has been the RBI’s steady accumulation of dollars. The RBI boosted its foreign-exchange stockpile to $600 billion by the middle of May, according to the latest central-bank data, up from a low of $525 million in October.
On Friday, the central bank’s data showed that India's foreign exchange reserves dropped by $6.052 billion to $593.477 billion during the week ending May 19. The decline in the forex reserve has halted a streak of two consecutive weeks of growth. In the preceding reporting week, the total reserves had risen by $3.5 billion, bringing the overall amount to just below $600 billion.
The rupee hasn’t been alone in weakening versus the greenback. All except two of 12 Asian currencies tracked by Bloomberg have dropped against the dollar over the past 12 months.
India’s current-account deficit is expected to narrow to about 1.4 per cent of the nation’s gross domestic product in the fiscal year to March 31, Bagree said. That compares with an expected shortfall of 2.2 per cent for the previous fiscal year, based on a Bloomberg survey of economists.
Services exports in India meanwhile jumped to $323 billion in the fiscal year ended March, up 27 per cent from a year earlier, the RBI data revealed.
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