Rupee to trade near record low; business anxiety weighs heavy

Indian rupee has become worst performing Asian currency.

Bengaluru: India’s battered rupee will trade in a tight range in the coming year but not far from its historic low, hampered by higher oil prices and as trade tensions hurt emerging markets, a Reuters poll found.

The Indian currency has lost over 7% this year, with worries over the US-China trade conflict pushing it to a new record low of 69.122 against the dollar in July, it the worst performing Asian currency.
Taken after the Reserve Bank of India hiked rates to a two-year high on Aug. 1, the latest poll of about 40 foreign exchange analysts showed the rupee is now expected to trade at 68.22 per dollar in a year from about 68.60 on Thursday.

While the 12-month ahead consensus is slightly better than expectations in a July poll, it largely reflects a recent strengthening in the rupee rather than a brightening outlook for the currency. This firmness is mostly because of the RBI’s interest rate hikes, and hawkish bias.

Bumpy ride ahead for weak rupee

  • A weaker rupee, stubbornly high inflation, elevated oil prices and global trade tensions pose the biggest downside risks to the economy.
  • With the US Federal Reserve expected to continue its tightening cycle this year and next, the rupee may face a bumpy ride.
  • The International Monetary Fund said on Wednesday the RBI will need to tighten policy further in order to stabilise rising inflation that is largely driven by higher oil prices and a falling rupee.
  • A poll showed retail inflation in India likely to dip to a four-month low in July as rains helped lower food prices.

(With inputs from Reuters)

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