Indian rupee may hit Rs18 vs AED 1 by year-end - analysts

UAE Exchange, however, expects rupee to trade in 64-64.75 range
By Parag Deulgaonkar
Thu 20 Jul 2017 10:46 AM

The Indian rupee is likely reach Rs18 to AED1 by year-end, according to analysts.

The Indian currency has rallied 5.2 percent in the first six months of 2017, with AED1 fetching Rs17.54 on Thursday morning.

By holding back their remittance till year-end, UAE-based Indians could earn three percent more return on their dirhams.

The World Bank, in its latest report, said India retained its top spot as the world’s largest remittance recipient, with inflows reaching $62.7 billion in 2016. The report said the majority of Indians sending money live in the Middle East.

In its latest report, the BMI Research said the rupee is expected to weaken in the near term and may touch Rs66 to a US dollar by year-end.

While the rupee was amongst the best-performing currencies in the world in the past one year, US interest rates and oil prices are expected to impact the performance of the Rupee, the report said.

“After several years of Indian rupee out-performance, a period of under-performance, against both the dollar and emerging market forex in general, is looking likely. We forecast the rupee to end 2017 at Rs66/USD.”

BMI said it expects INR to average Rs66.33/USD in 2018 and depreciate by one percent per year in spot terms over the long term as higher inflation rates necessitate a gradually weaker currency in order to maintain external competitiveness.

In an interview with Bloomberg, Pradeep Khanna, HSBC’s head of global markets trading for India in Mumbai, said the rupee may weaken as global funds start to hit buying limits for the nation’s debt and valuations for equities become expensive.

“I won’t be surprised if we drift down to 65-65.25 to the dollar over the next two months,” he said.

However, Promoth Manghat, UAE Exchange CEO, told Arabian Business that USD-INR has settled comfortably into a narrow trading range.

“Given that rupee carry trades are still attractive, fund flow into India is expected to be strong in the third quarter," he said.

"This is likely to blunt any sharp weakness in INR due to an overall risk off pressure in the emerging markets space. As such we expect rupee to be range bound within the 64 to 64.75 range."

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