The Indian rupee is all set to end as Asia’s worst-performing currency. This comes amid the foreign funds fleeing the nation’s stocks.
Also, Indian currency declined 2.2 per cent this quarter as the global funds pulled 4 billion dollars of capital out of India’s stock market. This is the most among regional markets where data is available.
Foreigners selling Indian stocks like Goldman Sachs Group Inc. and Nomura Holdings Inc. also lowered their outlook for equities.
What is spooking the investor’s sentiments is the Omicron variant of Covid-19.
Moreover, the record-high trade deficit and the central bank’s policy divergence with the Federal Reserve have also affected badly the rupee’s carry appeal.
On top of it all, monetary policy divergence and widening the current account gap have also set depreciation in the Indian rupee in the near term.
Depreciation in the Indian rupee is a double-edged sword for the RBI as well. On the other hand, a weaker currency may support exports amid a nascent economic recovery from the coronavirus pandemic.
Somewhere, it also poses a risk of imported inflation and may make it difficult for the Reserve Bank to maintain interest rates at a record low for longer.
However, there are expectations that the Indian rupee may see a decline to 78 per dollar by March-end.
The Indian rupee is also set to drop about 4 per cent this year in a fourth straight year of losses.
Furthermore, bearish rupee calls are seeing a rise as India’s trade deficit widened to an all-time high of about 23 billion dollars in November in the wake of higher imports.
The rupee gained 0.2 per cent this Monday to 75.9163 per dollar amid speculations that the RBI intervened to curb the rupee’s losses.
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