The Indian currency, despite a 26-paise fall in the past two trading sessions, has remained the strongest among its peers in the continent amid an extending global rout that has rolled monetary units of all exports-focused emerging economies.
The rupee has been a relative outlier despite the unabated dollar outflow from the local equities and the sharp rise in the dollar index in anticipation of US tariff walls that could dent east Asian economies.
Since October, the rupee depreciated 0.65% while the Russian ruble, Thai Baht and South Korean won weakened more than 4%. The Mexican peso turned 2.3% weaker while the Chinese yuan fell about 1.5% over the same period.
“Our external macroeconomic fundamentals are very strong and we have high reserves. This itself keeps a check on the degree of depreciation, because people are aware that the Reserve Bank will come in and break the fall. But when there is a huge turmoil and immense pressure due to an extreme event, these reserves will be used with discretion,” said Abheek Barua, chief economist at HDFC Bank.
If the rupee weakens further from the current level, it would help Indian exports to remain competitive. "We expect USD/INR to trade between 83.90-84.50 in the near term," said rating company CareEdge. Kotak Securities's head of research, currency and commodity, Anindya Banerjee, said: "My base case for rupee depreciation by end of December is 85-85.25, beyond that it will depend on policies by Trump."
.
The president-elect during his election campaign threatened to slap 10% tariffs on all goods, and up to 60% on Chinese goods being imported to the US.
"Although the RBI has huge reserves to prevent the rupee's slide, the currency still needs to be adjusted with other emerging market currencies. Going ahead we may see significant FIIs outflows on account of their year-end balance sheet management which in turn could add some more pressure to rupee but the possibility of a sharp depreciation from the current level is unlikely till the anticipated tariff war comes into play," currency risk management advisor KN Dey said.
Additionally, the ongoing Middle East conflict is also likely to remain a challenge, Dey said.
The rupee closed Thursday 9 paise weaker at 84.37 against the dollar. It opened at 84.25 while the previous close was 84.28. The Reserve Bank of India intervened in the market to prevent further weakening of the local currency, with nationalised banks were seen selling dollars on the behest of the central bank, foreign exchange dealers said.
"The rupee is still one of the outperformers in the world in terms of depreciation against the dollar as well as volatility. Right now also there has been a repricing in currencies on expectations of the Fed rate cut," said Banerjee.
"At the start of the month, the expectation was that the Fed would lower rates by by the end of next year to 3%, now that expectation has moved closer to 4%, so having seen the terminal rate jump by almost 100 basis points, the markets have re-priced the dollar index," he added.
The dollar index jumped to a high of 105.09 as compared with 103.4 before the US election.
The rupee has been a relative outlier despite the unabated dollar outflow from the local equities and the sharp rise in the dollar index in anticipation of US tariff walls that could dent east Asian economies.
Since October, the rupee depreciated 0.65% while the Russian ruble, Thai Baht and South Korean won weakened more than 4%. The Mexican peso turned 2.3% weaker while the Chinese yuan fell about 1.5% over the same period.
“Our external macroeconomic fundamentals are very strong and we have high reserves. This itself keeps a check on the degree of depreciation, because people are aware that the Reserve Bank will come in and break the fall. But when there is a huge turmoil and immense pressure due to an extreme event, these reserves will be used with discretion,” said Abheek Barua, chief economist at HDFC Bank.
If the rupee weakens further from the current level, it would help Indian exports to remain competitive. "We expect USD/INR to trade between 83.90-84.50 in the near term," said rating company CareEdge. Kotak Securities's head of research, currency and commodity, Anindya Banerjee, said: "My base case for rupee depreciation by end of December is 85-85.25, beyond that it will depend on policies by Trump."
.
The president-elect during his election campaign threatened to slap 10% tariffs on all goods, and up to 60% on Chinese goods being imported to the US.
"Although the RBI has huge reserves to prevent the rupee's slide, the currency still needs to be adjusted with other emerging market currencies. Going ahead we may see significant FIIs outflows on account of their year-end balance sheet management which in turn could add some more pressure to rupee but the possibility of a sharp depreciation from the current level is unlikely till the anticipated tariff war comes into play," currency risk management advisor KN Dey said.
Additionally, the ongoing Middle East conflict is also likely to remain a challenge, Dey said.
The rupee closed Thursday 9 paise weaker at 84.37 against the dollar. It opened at 84.25 while the previous close was 84.28. The Reserve Bank of India intervened in the market to prevent further weakening of the local currency, with nationalised banks were seen selling dollars on the behest of the central bank, foreign exchange dealers said.
"The rupee is still one of the outperformers in the world in terms of depreciation against the dollar as well as volatility. Right now also there has been a repricing in currencies on expectations of the Fed rate cut," said Banerjee.
"At the start of the month, the expectation was that the Fed would lower rates by by the end of next year to 3%, now that expectation has moved closer to 4%, so having seen the terminal rate jump by almost 100 basis points, the markets have re-priced the dollar index," he added.
The dollar index jumped to a high of 105.09 as compared with 103.4 before the US election.
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