MUMBAI: Rupee may remain under stress in the near-term as the downside risks are largely driven by external factors and will take time to subside, said Dun & Bradstreet (D&B).
It further expects INR to be around 72.3-72.5 per US dollar this month. The rupee’s year-to-date losses stood over 13 per cent against the strengthening US dollar following trade concerns and firming up crude oil prices. In August alone, the domestic unit plunged about 6 per cent. On Thursday, the currency closed at 72.38, 0.59 down than its previous close.
According to D&B, the projected economic growth, rising crude oil prices, strengthening of dollar, geopolitical tensions and economic sanctions will continue to impart depreciation pressures on the rupee.
“Elevated risks and heightened geopolitical uncertainty, trade wars and economic sanctions along with reworking of trade treaties will continue to impact emerging market currencies, including India,” Arun Singh, Lead Economist, Dun & Bradstreet India said in a note.
“(With) the fact that rupee remains undervalued as per the six-currency trade based REER (real effective exchange rate) index and there are adequate forex reserves to support rupee, the current level might not be the new normal for rupee,” he added.
According to Singh, the proposed government measures like curbing non-essential imports will be favourable for the domestic industry and the current account balance but might send out protectionist signals.
However, these recent initiatives to support the rupee were only initial and more can be expected.
Considering the prevailing global uncertainty, along with tightening dollar liquidity in the global market, measures to attract FPIs to support the rupee might have limited impact, at least in the short-term, it said.