In the near future, the Indian rupee may further weaken to 82 to the dollar as a result of the expanding trade deficit and the anticipated aggressive rate hike by the US Federal Reserve later this week to control record-high inflation, according to experts. It is widely believed that the US Federal Reserve would raise interest rates by 50 to 75 basis points at its meeting on July 26 and 27, which might cause capital to leave developing countries like India. Further devaluation of the rupee would be caused by dollar outflow and high crude oil prices. The rupee dropped last week to a record-low of 80.06 against the dollar.
After reaching a record low, economists predict that the rupee will stabilize around 78 to the dollar by March of the next year, as long as crude oil prices remain stable and the geopolitical situation is expected to improve.
ICRA predicts the rupee to depreciate to 81/USD in Q2 FY2023, despite a rise in crude oil prices and expectations that the US currency will remain relatively strong in the near future.
ICRA Chief Economist Aditi Nayar stated: “Global sentiment and the direction of foreign portfolio investment (FPI) flows will thereafter determine whether the Indian rupee continues to weaken in the remaining months of the year, or if US recession fears eventually arrest the dollar rise.”
Nomura predicts that the rupee could reach 82 during the July to September quarter due to a number of factors, such as the year-long Fed rate hikes and deteriorating India BoP dynamics.
