Indian rupee will remain weak, a third of analysts expect a new low in a year: Reuters poll

A customer hands a 50 Indian rupee note to an employee at a petrol station in Ahmedabad, India, October 5, 2018. REUTERS/Amit Dev/File photo Acquire licensing rights

BENGALURU (Reuters) – The Indian rupee will remain very close to a historic six-month low despite the Reserve Bank of India using its coffers to reduce volatility, a Reuters poll showed. Reaching a new low in one year.

After trading in its narrowest range in two decades this year, the rupee slid to a 10-month low of 83.18 on Wednesday, near the record low of $83.29 hit in October 2022, on expectations that US flexible yields will keep The dollar is in good shape. -tender.

However, regular interventions by the Reserve Bank of India, which have brought foreign currency reserves down to less than $600 billion, have ensured limited depreciation.

The median forecast in the Sept. 1-6 poll of 45 analysts showed that the rupee would rise modestly to $82.88 and $82.75 by the end of September and the end of November, respectively.

It was expected to rise less than 1% from Wednesday’s level to $82.50 in six months and about 1.5% to $81.95 in a year.

“The rupee is still running in a very tight range even though it has recently rallied against the top of its trading range, and it seems clear that the absence of intervention will weaken, perhaps significantly. The RBI does not seem willing to allow that,” said Robert Carnell, regional head. For research at ING:

“The core inflation rate will rise again this month and will remain elevated for a few months before falling back within its target range. This usually puts pressure on the rupee to weaken…but rising global food prices is another reason to want to keep the currency strong. A softer rupee can wait.”

India’s inflation was expected to remain above the Reserve Bank of India’s (RBI) target range of 2%-6% until at least October, but the central bank resorted to market intervention rather than policy action to support the currency.

The Reserve Bank of India drained about $14 billion of foreign reserves in just over a month in August.

The forecast was in a narrow range of $80.00-$85.33 over the next 12 months, which is narrower than the $78.83-$85.80 range in a survey conducted a month ago.

More than a third of the 45 economists surveyed expected the currency to touch a new record low sometime during the next year.

“Even if the rupee comes under downward pressure in the near term, we think the central bank is in a good position to step up its intervention in the foreign exchange market… given that it spent the first half of the year accumulating foreign exchange reserves,” he said. Thammachi D’Silva, Indian Economist Associate at Capital Economics.

“To be clear, the rupee has exceeded our year-end forecast at $83.0 and may now end the year lower than our forecast. However…we expect the rupee to rebound next year as the Fed eases its policy. US Treasury yields decline.”

(For other stories from the Reuters September Foreign Exchange Poll:)

Reporting by Anant Chandak. Poll by Veronica Khonguer and Meloni Purohit; Editing by Jonathan Keeble and Sharon Singleton

Our Standards: The Thomson Reuters Trust Principles.

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