The Indian rupee fell versus the UAE dirham and the US dollar amidst uncertainty surrounding the Indian currency, and could cross 20 against the dirham again in the coming months due to concerns about funds outflow and economic slowdown concerns, analysts said.
The rupee opened on a weak note and fell 17 paise to 71.71 against the dollar in early trade on Thursday amid foreign fund outflows and cautious opening in domestic equities. Against the UAE dirham, the rupee was trading at 19.52 at 9:40 am (UAE time), according to XE.com.
The rupee fell to a six-month low of 19.54 versus the dirham or 71.71 against the greenback on Tuesday but made a brief recovery on Wednesday and rose 23 paise in the morning to 19.47 versus dirham or 71.48 against the dollar.
It has lost 4.4 percent in the last four months, making it the worst performer in Asia. The rupee hit an all-time low of 20.24 on October 10, 2018. Ahead of elections in India, the rupee had strengthened to 18.66 vs the dirham on April 4.
US bank JPMorgan Chase & Co. forecast that the Indian currency will hit 73/74 vs dollar (19.9/20.2 vs dirham) in the coming months, mainly due to waning internal and external growth.
Jonathan Cavenagh, head of foreign exchange strategy for emerging markets Asia at JPMorgan Chase, sees the rupee being overvalued in real effective exchange terms.
As per the Real Effective Exchange Rate (Reer), the rupee is overvalued by around 1.25 percent.
He pointed out that rupee is heavily going to be impacted by several factors such as foreign institutional investor flows to Indian capital markets, government stimulus measures, RBI monetary policy trajectory, crude oil prices, and Indian sovereign yields.
The Indian economy, which is the fastest-growing economy in the world, is also facing slowdown concerns as former Reserve Bank of India governor Raghuram Rajan on Tuesday warned that the economic slowdown is "very worrisome" and called for taking a fresh look at how the GDP is calculated.
Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services, said rupee has depreciated close to four percent in the last month, primarily on account of weak macro-economic data, poor corporate performance and on account of fluctuations seen in the emerging/Asian currency markets.
"I do not anticipate the currency to weaken further and at best expect it to depreciate up to 72.25 to the dollar (19.7 vs dirham) in the near term. The prevailing scenario of low oil prices and high gold prices should mitigate any steep fall in the currency in the coming months," he added.
Source: Khaleej Times