Indian rupee is predicted to see a sharp fall in the first quarter of 2023, hitting a record low of INR84.80 per US dollar by April, forex market experts said.
The plunge in rupee value is expected to trigger a major spike in remittances by Gulf-based non-resident Indians (NRIs) in the coming months.
Rupee has been weakening against the greenback in the past few days – trading in a range of 82.40 – 82.94 since mid-December amid persistent demand for dollars.
The Indian currency was trading at 82.79 in the early trading hours on Thursday.
The US dollar, on the other hand, gained against nearly all its major peers as trading kicked off in 2023 after a seasonal holiday lull.
The Japanese yen was the only Group-of-10 currency to strengthen against the greenback on Monday trading.
The Indian rupee’s narrow trading range against the dollar over the last three weeks may set the stage for a big directional move and a jump in volatility, analysts said.
“Near term outlook is bearish for the rupee and by end of January it could test 83.50 – 83.60 and by the end of this quarter it is likely to test 84.80 levels,” Manoj Jain, a currency market expert and director of Prithvi Finmart Pvt Ltd, told Arabian Business.
“Continued strengthening of the US dollar, gloomy global growth outlooks and widening of Indian trade deficits putting pressure on country’s foreign exchange reserves could weigh on rupee value in the coming weeks and months,” Jain said.
The dollar held at lower levels on Wednesday after minutes from the US Federal Reserve’s December meeting offered no surprises or new information about the size of its expected rate hike in February.
Analysts said dollar Index is expected to trade in the range of 105 to 103.25 as FOMC (Federal Open Market Committee) meeting minutes reiterated its focus on inflation with a mention of wariness around ‘unwarranted’ easing in financial conditions.
“Rupee looks weak as the dollar is getting support. Recession and growth concerns are the other factors impacting rupee value,” Ajay Kedia, managing director of Kedia Commtrade and Research, told Arabian Business.
“By January end we expect the rupee to trade in the range of 82 – 83.60, and fall further to 84 level against dollar by March 2023,” Kedia said.
Kedia said concerns about rising Covid cases, crude prices, fall in forex reserves, significant jump in trade deficit and sustained foreign fund outflows will continue to plague rupee value in a near-to-medium term basis.
“However, post-May-June, rupee appreciating with a bias towards 80 is very likely,” Kedia said.
Jain also said positive domestic growth outlooks, better agriculture growth and scaling up manufacturing activities could support the rupee in the longer term.
The projected rout in rupee is seen to be pushing up expat Indian remittances, especially from the Gulf region, as they can earn more bucks for each dollar remitted.
Banking circles said historically, NRI remittances, especially from the Middle East, see a surge in remittances when rupee hits a downward spiral.
NRIs based in the Gulf region account for a larger chunk of expat remittances to India.
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