NEW DELHI: Weakening dollar, structural changes in current account deficit (CAD) and global slowdown seem to support Indian rupee (INR) against the US dollar as experts say rupee could regain some lost ground and go back to 80 per USD levels.
The Indian currency appreciated by 1% since start of FY24 and is currently trading at 81.74. The Indian currency depreciated 7.8% in FY 23, while touching its lowest at 83.28 in October. Madhavi Arora, Lead Economist, Emkay Global Financial Services, also echoed the same viewpoint.
She expects INR to touch 80 again on the back of narrowing CAD and lowering dollar. “Yes we would see it touching 80 again. The current account ideally is looking positive for India for next year because of the lever with services and conventional services going up. Overall current account sustainability should be in a better shape whereas, at the same time whether it will be able to sustain below 79 for a longer period this year, we will have to see,” Arora said.
Rumki Majumdar, economist with Deloitte India, says INR depreciated over the past one year primarily because of the strengthening of the dollar index. “But with the impending US and global slowdown, the dollar value is weakening. This should help INR to gain back some strength,” she says
One of the major reasons that is helping rupee become stronger is the structural change in India’s current account is. In FY24, the current account deficit is estimated to be 1.4% of GDP from 2.1% of GDP in FY23. As per Majumdar, India’s decision to use INR for global trade settlement, ability to import oil at discounted prices, and rising services export will likely reduce demand for the dollar and ease pressure on INR, as per Majumdar.