After Rupee hits 78 versus Dollar, will it touch 81?

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Ziraat Times
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Mumbai, June 13: Indian rupee too hit an all-time-low of Rs 78.15 against the US dollar on Monday, coupled wth BSE Sensex down by 1400 points. But the bad news isn’t over. According to analysts from UBS AG, Nomura Holdings, etc., the Indian currency may drop further to between Rs 79 to Rs 81 per dollar over the next few months. According to many experts, India’s decline in foreign exchange reserve by Rs 30.6 crore in June could also have been a key reason behind the depreciation of the domestic currency.

“Currently, global forces are probably pushing the rupee to depreciate. So, I think we ourselves are looking at rupee somewhere close to 79 by the end of this fiscal year, and a lot depends on where we see the political, geopolitical crisis shaping up,” said Yuvika Singhal, economist at QuantEco research.

India’s stock markets opened in red on Monday, with the BSE S&P Sensex tumbling over 1,400 points to reach 52,860 level. Moreover, the Monday morning bloodbath seen on the Dalal Street, along with the fall of the rupee, have various other contributing factors. First one being the US inflation which has accelerated to 8.6 per cent, the highest in the last 40 years. This inflation data has made it clear that US Fed will be going for more aggressive rate hikes to tame inflation, thereby weighing on markets and investors.

As per Pronab Sen, the ex-chief statistician of India, “Rupee depreciation is not a big concern as of now; we should mentally be prepared for the rupee to depreciate. I think, rupee should be allowed to depreciate but volatility needs to be curbed because volatility creates uncertainty.  And uncertainty is bad for any economic system. So, RBI should not focus on managing value of rupee but should focus on managing volatility.”

According to a poll by Reuters, the US Fed is likely to hike its key interest rate by 50 basis points in June and July.  Also, as per many experts, another big factor contributing to the present weaker market sentiments is the ongoing volatility in the oil market. Both Brent Crude and WTI Crude slipped 1.4 per cent to trade at $120 per barrel and $118 per barrel, respectively. In addition, India’s retail inflation, which is also above the RBI target, is spooking the investors in the market.

Many economists and experts also say that there is no scope for inflation to cool down now, and according to them inflation in India will go up to 8 per cent and then will start coming down. But amid economic dynamics changing on a daily basis, it is difficult to predict anything, only time will tell where the global and Indian economy is headed to.

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