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Mon 2 Dec 2019 11:05 AM

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Indian rupee forecast to weaken further by end-2019

Indian currency is expected to weaken to 72.50 against US dollar in the next two weeks

Indian rupee forecast to weaken further by end-2019

India’s GDP growth plunged to a six-year low of 4.5 percent during July-September 2019 quarter, compared to 7 percent in the corresponding period of last year.

The Indian rupee is projected to weaken to 72.50-72.70 level in the next fortnight and further plunge against the US dollar by the end of 2020 due to rising concerns on growth slowdown globally and in India, forex market analysts have said.

Some currency market analysts, however, are more cautious in their projections and see a lower, gradual decline in the Indian currency over next 12-month period to 75-76 level against the greenback.

“We are bearish on Indian currency of account of slowing global growth rate, widening fiscal deficit, slump in consumption expenditure and increased pace of slowing Indian economy,” Tarun Satsangi, a commentator on currency market on Indian business TV channels and founder and CEO of tarunsatsangi.com, told Arabian Business.

“We expect rupee to weaken to 72.50 towards end of this year and 78 by 2020 end against the USD,” Satsangi added.

India’s GDP growth plunged to a six-year low of 4.5 percent during July-September 2019 quarter, compared to 7 percent in the corresponding period of last year.

This is the lowest growth in the Indian economy since Q1 of 2013.

Satsangi said India’s stock market currently did not reflect the actual slowdown in India’s economy. “If any correction happens in it (stock market), it will up the pain for rupee,” he said.

The Indian corporate sector also seems to concur with the view about further weakness in the rupee, incorporating it in budget and expenditure calculations for the next 12-month period.

“Our internal calculations see a 6-7 percent depreciation in the value of rupee to 75-76 against US dollar over the next 12-month period, and we have already incorporated it in our budget plans,” a senior finance executive with the Indian subsidiary of a UK-based MNC, told Arabian Business.

The MNC executive, however, said the fall in rupee value is expected to be gradual and is not expected to give any shock.

“Our view is that since the expected depreciation in rupee value will be gradual, India economy will be able to absorb it,” the MNC executive said.

DBS Bank of Singapore also sees further weakness in the Indian currency in the next few months.

“The rupee will continue to watch CNY (Chinese Yuan Renminbi) movements and broader US dollar bias, which at this juncture points towards further rupee weakness owing to a weak global environment,” DBS said in a recent report.

Industry circles, however, said as of now there was no rush by companies to take forward cover for their foreign currency borrowings.

“Companies may be studying the risk on account of the projected fall in rupee value vis-à-vis the possible increase in forward premium in case of a rush for such cover,” an industry analyst said.

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