The rupee, which has lost 18 per cent against the dollar in the last three months, could be headed for fresh lows, at least in the near term (couple of weeks), said dealers and economists.
On Monday, the rupee crossed the 52-mark against the dollar, as nervous foreign exchange traders squared-off their positions, on fading hopes that the Reserve Bank of India (RBI) would step in to control the fall. The rupee fell by 82 paise to close at 52.15, an all-time closing low.
Though R Gopalan, secretary of economic affairs, on Monday said the central bank’s ability to intervene in the foreign exchange market was “limited”, most experts are hoping RBI would step in to arrest the fall sooner rather than later.
Business Standard conducted a poll of 10 dealers and economists on their rupee guidance for the near term and for the year-end. After Monday's fall, most of them were reworking their forecasts for the rupee-dollar exchange rate. “We are in the process of revising the forecast and, most likely, it would be revised downwards,” said an economist from a foreign bank, on the condition of anonymity.
“It is difficult to give a strong forecast at this point. The rupee may depreciate to 52.50-53 levels in the near term, depending on the developments in the euro zone,” said Priyanka Kishore, foreign exchange strategist, Standard Chartered Bank.
What is encouraging is that forecasts for both December-end and March-end are positive. For instance, according to Standard Chartered forecasts, the rupee would stand at 50/dollar by December and 48.8/dollar by March-end. The predictions of Crisil were the most bullish — Rs 50/dollar by December-end and 46/dollar by March-end.
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However, many are hinging their predictions on RBI’s intervention. Vivek Rajpal, India rates strategist, Nomura, said the rupee would recover to some extent by the end of March, assuming RBI would be active in managing the exchange rate. “Rupee is an equity currency, and a change in RBI's stance from an anti-inflationary one to a pro-growth one would also be helpful in holding the rupee-dollar exchange rate at current levels,” he said.
Traders had expected RBI to arrest the rupee's fall. But recent comments from a central bank’s senior official that the bank would not change its stance has hurt market sentiments. RBI Deputy Governor Subir Gokarn had said the apex bank would not set an exchange rate, and that the objective would only be to smoothen excess volatility.
Data shows RBI had sold $845 million in September, when the currency had witnessed sharp volatility and depreciated 6.25 per cent.