The rupee which showed recovery in the first seven months of the CY’19 lost almost all of their gains in August itself. This has come on the back of heavy FPI outflows and concerns around economic slowdown.
Rupee set for biggest monthly loss in 6 years
As per a forex strategist at Nomura, even though India is unlikely to have direct repercussions of US-China trade woes, nonetheless it can’t remain completely unaffected from it.
Dushyant Padmanabhan, a forex strategist at Nomura Holdings Inc. in Singapore said, “Even though India is directly less vulnerable to US-China tensions, it can’t remain completely insulated to the wider risk aversion. The economic slowdown and capital outflows don’t bode well for the rupee.”
Also, there has been a pullback of global funds from Indian equities after the FM in budget 2018 levied a surcharge on super-rich that also brought into a net some FPIs registered as trusts.
Ashish Vaidya, head of trading at DBS Bank Ltd. in Mumbai said, “Fundamentals remain challenging for the rupee, and it will keep depreciating given the global and local headwinds. India no longer enjoys “a premium” over other emerging markets.”
Also, the rupee is trading in line with other Asian currencies which also have been hit to trade woes and pulled some of the currencies like the Chinese yuan to an 11-year low.
Mitul Kotecha, a senior emerging-markets strategist at TD Securities in Singapore said, “Large outflows have fueled the rupee’s weakness and the size of the drop has caught a lot of people by surprise.”
Analysts are of the belief that the currency is likely to witness the worst monthly loss in 6 years time and there is more pain in store for the domestic rupee. Nomura expects the currency to end 2019 at 72.5 per dollar.
Sajid Chinoy and Jonathan Cavenagh wrote in a recent note, “If the CNY continues to depreciate against the USD, as we expect, we believe the rupee will depreciate virtually lockstep with the CNY.”
