The rupee will continue to feel the heat on the back of a growing demand for the dollar across the globe, as uncertainty on growth prospects persists.
Rupee closed at 47.27 against the dollar on Friday, with a weekly loss of 1.5 per cent, having touched a near-two-year low of 48.01 last week. The rupee-dollar pair has moved from 44.1 to 47.8 in the past six weeks.
“The sharp move of the rupee in recent weeks has caused a great deal of concern among foreign investors, as poor returns from India’s financial markets this year have been further exacerbated by this development,” said Deutsche Bank Economists Taimur Baig and Kaushik Das.
Market participants expect a further fall in the rupee, though after some correction. “There could be some appreciation, but it will be capped by dollar demand from oil importing companies in India,” said a treasury official of a public sector bank. High commodity prices globally, coupled with dollar crunch, might continue to drag the exchange rate further, he added. India imports around 80 per cent of its oil requirement.
India’s high current account deficit makes the rupee more vulnerable to global developments. “We expect the rupee to remain weak in the near term if the trade-weighted US dollar continues to rise,” said Macquarie in a research note. The global research company expects rupee to remain in the range of 46.5-47.0 through December-end.
