Report says Rupee will weaken in another 6 months

Last Updated: Thu, Dec 06, 2018 14:08 hrs
Rupee Vs US Dollars

poll of 40 economists conducted by news agency Reuters, says Rupee could weaken in the next six months, a time that the nation would head into election mode.

The Survey of 40 strategists was conducted between Nov 28 - Dec. The respondents said Rupee could weaken by 2% to to 72.00 against the dollar by the end of May 2019. This, coinciding with the general election.

The domestic currency had been out of favour for a better part of 2018. The Rupee had also been tagged among reports to the worst performing Asian currencies list. In October, the Rupee stooped to a record low of 74. This was post the announcement on crucial interest rates by the Reserve Bank.

The Reuters report also quotes Amy Yuan Zhuang, Chief Asia Analyst at Nordea as commenting, "Despite the current relief for the INR, India remains vulnerable to domestic and external woes. Its weak external fundamentals leave it prone to another round of sell-offs," noted Amy Yuan Zhuang, chief Asia analyst at Nordea.

She also added that liquidity crunch in the Indian financial system combined with "excessive bad" debts among banks diminishes confidence in Indian assets.

The Rupee has recovered to levels of 70, (On Tuesday the Rupee quoted 70.49 against the USD). Markets heaved a sigh of relief after the US Federal Reserve Chief hinted that interest rates may not be hiked in the next policy announcement. Crude oil retreating back to levels of $ 60-70 per barrel also gave crude importers a breather.

But, the oil market is expected to head to turn volatile. US President Donald Trump tweeted that crude oil rates should be kept at a check, while members of the OPEC cartel such as Oman do not seem very enthused. Russia, Saudi Arabia too were considering of announcing a cut in production to help raise international price.

A meeting between OPEC and non-OPEC countries is expected on Thursday, with a possibility that supplies may be cut.