Amidst an already tumultuous year that has witnessed the Indian currency falling to all time lows multiple times, the road ahead seems no less difficult.
The rupee?is likely to remain under pressure next year and could even?touch 85 against the US dollar, according to economists, as per a PTI report.? ?
Ever since Russia invaded Ukraine in late February and there was the resultant spike in crude prices and supply chain disruptions, the rupee has been under tremendous pressure. The domestic currency had touched an all-time low of 83 against the dollar on October 19th.??
Currently, the rupee is hovering around the 81.70 mark against the dollar.
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On Thursday, during a?panel discussion at the?SBI?Banking & Economics Conclave,?various economists?said the rupee will continue to be under pressure given the widening current account deficit, which is seen at close to 4% of the GDP this fiscal.
There is also pressure on forex earnings as exports have begun to fall since last month, they said, and they expect the rupee to trade between a high of 82 and a low of 85 to the dollar in 2023, as per the report.
Deepak Mishra, the Director and Chief Executive at the economic think-tank ICRIER (Indian Council for Research on International Economic Relations), and Sajjid Chinoy, the Chief Economist at JP Morgan India, forecast the rupee to hit a low of 85 and a high of 83 to the dollar next year, i.e., in 2023.
On the other hand, Soumya Kanti Ghosh, the group Chief Economic Adviser at the State Bank of India, has the best projection for the rupee at 80-82 against the dollar, which is roughly the current level, according to the report.?Further, he said the Rupee may rise to 81 in the first half of 2023 and fall to 82 in the second part.
As per the report, Rajeswari Sengupta, an associate professor at IGIDR (Indira Gandhi Institute of Development Research), said the rupee is expected to trade at 84 to a dollar and even plumb to 85 in the second half of the next year, but only if the Reserve Bank of India (RBI) stops intervening in the money market.
Ashima Goyal, an external member of the RBI's rate-setting Monetary Policy Committee, said the?rupee will begin to fare better in the second half of next year.
According to JP Morgan India’s Chinoy, the dollar volatility index, or the DXY, is at a two-decade high as the US Federal Reserve is aggressively hiking rates due to high inflation in the American economy.
Similarly, the European Central Bank has reportedly been on a rate hiking cycle, which it has not done at all in the past, following the gas shortage after Russia invaded Ukraine.
It remains to be seen whether the rupee can recover in the coming months and years, or whether it will continue to fall.?
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