Rupee may go up after downfall, depressed by an escalating US-China trade war and rising domestic political risks ahead of a general election, a Reuters poll showed.
Investors have generally shunned emerging market assets this year, made riskier by the international trade tensions and the increasing attractiveness of dollar yields thanks to the US Federal Reserve’s steady pace of rate increases.
That, and a widening current account deficit due to higher global crude oil prices and capital outflows, has pushed the rupee down almost 16 per cent this year, regularly setting all-time lows. It’s one of the worst-performing Asian currencies this year.
“The Indian rupee reflects emerging market concerns and is facing significant depreciation pressure,” noted Tuuli McCully, head of Asia-Pacific economics at Scotiabank.
“In addition to the twin-deficit position, political uncertainty in India will remain high over the coming months due to four state elections that will be held by the end of January 2019, followed by general elections in April-May 2019; accordingly, we remain bearish on the INR over the medium-term.”
The poll of about 40 foreign exchange strategists taken October 26-31 showed the rupee was expected to gain slightly to 72.5 per dollar in 12 months from about 73.95 on Wednesday.
But the predicted outlook for the currency will still leave it much weaker than where it started 2018 around 63.80.
The latest consensus was only slightly better compared to the previous month, and more than one quarter of strategists with a year-ahead view predicting the currency to hit a new record low by then.
The recent life-time low for the rupee was 74.485 per dollar on October 11.