Rupee could touch 70 to one US dollar soon
The Indian Rupee on Wednesday crippled to a nine-month low with Rs 68.42 a US dollar, down 0.26% from its previous close of Rs 68.26. But worse days are ahead with an RBI source saying the apex bank felt it would touch Rs 70 per dollar by next week.
Even though RBI has managed to keep the Indian currency stable, there has been tremendous pressure on the Rupee over the past three months as the US dollar has been rising.
In November alone, foreign investors have sold Indian equity worth over Rs 9000 crore so far which has been one of the major factors rupee has been hurt.
However, some currency experts have said that demonetisation and the current cash crunch in the Indian economy will not affect rupee-dollar rate as, according to them, the rupee’s fortunes are more linked to the global factors at this stage, mainly the US factors, rather than domestic drivers.
But Fitch Ratings, a leading rating agency, has said that the positive effects of demonetisation of Rs 500 and 1,000 notes are unlikely to be of long term nature.
After demonetisation, apart from gold purchasing, other methods of money laundering such as selling of dollar was also flourishing. It was reported that some dealers were selling dollars between Rs 85 and Rs 110 against the official rate of around Rs 67 per dollar.
Market experts have said that demonetisation will provide ammo to RBI to stabilise the rupee. It is said that RBI can extend dollar sales without any liquidity stress.
Experts say that rupee will outperform in the coming months due to India’s strong macro and foreign exchange reserves but as of now it won’t be able to resist the falling trend. Currency analysts say the rupee is bound to lose some value as global investors are seen dumping emerging market securities.