PTK MONITORING DESK
New Delhi, January 07 (PTK):The Indian rupee (INR) can weaken to 90-92 level against US dollar in the coming 6-10 months, say experts.
According to the report quoting experts, the renewed weakening of the Indian rupee to a fresh all-time low of 86 against the US dollar comes in the backdrop of a resurgent dollar index, which has risen by 8 percent over the past three months (from the end of September 2024). This development is significant as it impacts India’s financial conditions, particularly in equities and bonds, which are now part of global indices.
The US economy has emerged stronger than expected which has forced the US Federal Reserve to scale back two out the guided four rate cuts in 2025.
The report states thst INR/USD has demonstrated remarkable currency inflexibility over the past two years enabled by aggressive usage of forex reserve management by the Reserve Bank of India (RBI), on both sides.
Since October 2024, the RBI’s foreign currency assets (FCA) declined by $47 billion leading to Rs 4 trillion of domestic liquidity drain and a deficit liquidity situation, notwithstanding the 50 basis points CRR cut and purchase of Gsec by the RBI.
But this position is becoming untenable as the rapid strengthening of dollar is accentuating the misalignment, the report quoting experts said.
Currency market experts say that downside surprises in domestic growth performance have made rupee (INR) vulnerable. “Since 2008, INR/USD has depreciated more (90 percent) than the other currencies (38 percent EM dollar index, and 21 percent AE dollar indices) because of the narrowing growth differential versus global. This is how rupee has suffered because of these domestic factors against dollar“ they said.
Notably, according to the experts, “global models with assumptions of a strong US nominal GDP growth at 4.6 percent in 2025, higher rates for longer translating into 10-year US Treasury yield at 4.0 percent versus current 4.6 percent, and 2-months Treasury yield less 5-year breakeven inflation at 1.9 percent could imply strengthening USD against both EM dollar index and INR/USD. Consequently, the EM currency index could depreciate by 5 percent and INR by 7-10 percent.”
Considering domestic as well as global factors the experts estimate suggests that INR/USD can depreciate by 7-10 percent from the recent pegged levels of 84 to 90-92 in the coming 6-10 months. (PTK)
