The Indian rupee will fall further against the US dollar for the rest of the year, a Reuters poll showed on Thursday, setting the currency for its biggest annual decline in at least nine years due to a rise in the domestic trade balance and US interest rates.
On Thursday, the rupee had fallen to a record low of 83.2150. According to the average and average forecast of the survey of 14 bankers and forex advisors, it is likely to fall further to 84.50 by December.
The South Asian currency has already fallen about 12% so far this year, on par with its decline throughout 2013, when the US Federal Reserve’s decision to slow bond purchases prompted broad selling in emerging market currencies.
The estimate in the survey was between 83.25 and 86, showing a broad consensus that the rupee will not recover this year.
Bank of Baroda Chief Economist Madan Sabnavis said, “Rupee may fall to 85 level by December, as we do not see any major change in external environment.”
“The dollar continues to rise and our local fundamentals remain weak. We expect India’s current account deficit (CAD) to be at 3%-3.50%.”
A rise in the CAD occurs when India runs a high trade deficit when the global economic scenario is not conducive to portfolio flows, putting pressure on the rupee.
India recorded an average monthly trade deficit of $23.2 billion for the first nine months of this year, compared to an average of $15.3 billion in 2021.
Meanwhile, capital flows have been hampered by the Fed’s aggressive rate hikes to control inflation.
The Fed’s hike has pushed the dollar index up nearly 18% this year and prompted investors to pull out capital from emerging market assets.
According to NSDL data, foreign investors have pulled out $23.4 billion from Indian equities and $1.4 billion from debt so far this year.
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