Rupee Set To Hit Historic Lows Of 80 Per Dollar In Next Three Months: Report

After a month of trading near a nadir of 80.06 per dollar, the rupee strengthened to a one-month high of 78.49 on Tuesday, providing relief for the Reserve Bank of India

Out of 40 analysts, 18 expected the partially convertible rupee to have reached or breached the 80 per dollar mark in three months

Source : AFP

Despite a recent recovery, the Indian rupee will trade near its historic low in the coming three months, a Reuters poll of foreign exchange strategists revealed.

According to the report by the news agency, the Indian currency will depreciate, based on a widening trade deficit and global flows into safe-haven US dollars, a Reuters poll of foreign exchange strategists found.

After a month of trading near a nadir of 80.06 per dollar, the rupee strengthened to a one-month high of 78.49 on Tuesday, providing relief for the Reserve Bank of India (RBI), which has been defending the rupee while burning through foreign currency reserves.

However, the revival is not likely to last. The median forecast in an August 1-3 Reuters poll of 40 analysts showed it trading back near an all-time low by end-October.

Out of 40 analysts, 18 expected the partially convertible rupee to have reached or breached the 80 per dollar mark in three months, compared with just 30 per cent who said so in a July poll, while most saw it sinking to a new record low.

Asked what would be the rupee’s lowest point against the dollar over the course of the next three months, 16 analysts who answered an extra question gave a median of 80.50, with a range of 79.75-81.80/$.

Much will depend on what the RBI decides to do with interest rates. It was expected to raise the repo rate, currently at 4.90 per cent, by a minimum of 35 basis points on Friday, but economists were split four ways on the size of the move.

Sakshi Gupta, an economist from HDFC Bank, said the focus is now on whether or not the US Federal Reserve delivers a third consecutive 75 basis point interest rate hike at its September meeting. “The RBI is not likely to be as aggressive...further depressing the rupee,” she said.

The RBI, which only began raising rates in May, is relatively behind in its hiking campaign and is only due to deliver 110 basis points more in total.

Gupta also said the latest US-China tensions added to an already attractive environment for the safe-haven dollar. “That suggests the recent rally is short-lived and there is a strong possibility of the rupee breaching the 80 mark,” she added.

The currency was expected to recover to 78.83 per dollar by end-July next year, the latest poll showed.