Commodities & Currency

Rupee at risk from dollar gains, Experts predict it could slip to 82 as Dollar strengthens

Rupee at risk against dollar
  • Rupee tumbles to 78.95 today from 74.51 on January 1, 2022
  • Continuous FII outflows, rising dollar index, rising interest rates and inflation are major concerns. Sliding the rupee lower is a concern.
  • Analysts predict that the rupee could fall as low as 82 in the coming time.

India’s currency, the rupee, has been extremely volatile this year despite the efforts of the Reserve Bank of India to prevent it from weaker. Rising crude oil prices, interest rate hikes across central banks, and the continuous outflow of liquidity from the market have only dragged it down.

Yesterday on June 28, the price of the dollar touched 78.78 by falling 41 paise in a single session.

Today, United States dollar price fell to $79.02 and then tapered just slightly to 78.92 on a couple of days due to rising of crude oil prices and Russian bombings earlier in the week and a global relief rally.

Rupee fell 5.9% this year to 78.95 today from 74.51 on January 1, 2022. Most of the economists expect it to fall more than majority of them are attributing the current economic conditions.

“Despite the Indian rupee remaining largely stable, the geopolitical tensions and soaring inflation have exacerbated the economic uncertainty and growth fear. After implementing a currency wars strategy of reducing its liquidity to curb the impact of strengthened dollar, RBI has increased its support levels around 78 to combat further depreciation.” said Ravi Singh, vice president and head of research at Share India.

The continuous flow of foreign investments, the rising dollar index, rising interest rates and inflation are major concerns as they slide the rupee lower.

Rupee could slide to as low as Rs 82 in coming time

Foreign institutional investors sucked out ₹2.22 lakh crore of money from the Indian markets by selling off all sorts of investments, including equity and debt, in the year just ended, while they plans on investing ₹50,000 crore in new investments as a result of this figure in 2021.

“Interest rates are increasing, which is why more and more emerging market investors are moving money from stocks to bonds,” said Amit Khare, AVP-research commodities at Ganganagar Commodity.

Rupee has been floundering, but currency might be a bargain. “It has chance to hit 82 levels in the coming future, currently trading around 79.00”, said Khare.

Pushing the dollar further and making it a more expensive currency through actions of the RBI has generated more and more tension with the US.

The Indian rupee has been pressured by recent changes to the RBI’s policies on forwards, non-deliverable forward NDFs and derivatives. The course has caused rupee/dollar premiums to fall even further in USD, with the US dollar liquidity crunch and continuous outflows from the local currency contributing to the rupee’s jitters.

Related: Rupee Depreciation significantly affects the economy

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