Demonetisation effect: Rupee to fall record low in 2017
The rupee is likely to touch bottom line and may fall to record low against the U.S. dollar in this year, predict a poll by Reuters. The Rupee was on the path to recovery in 2016, but faced the heat after the US Election and India’s Prime Minister Naredra Modi’s controversial decision to ban banknotes of Rs 500 and Rs 1000 denominations.
In 2016, the Indian currency weakened only 2%, added the poll. However, huge capital outflows, were reported in the aftermath of the US Elections, amid speculations over drastic tax cuts, infrastructure projects and deregulation, that led to the fall of rupee.
The rupee may reach 68.50 a dollar in January against the present rate of 67.73, and again fall to 69.50 by the end of 2017.
“We see a less rosy scenario in the capital account and current account front in the coming two years, with global bond yields and money flowing back to the U.S.,” said Bhupesh Bameta, head of FX research at Edelweiss Financial Services told Reuters.
The Fed has increased the federal funds rate in December, indicating that economy is back on track. The central bank has suggested a faster pace of rate increases for 2017, reviving hopes about recovery of economy.
In US, under the impact of Trump’s victory, stock market has improved and the 10-year U.S. Treasury yield had risen above 25 percent and touched above 2.641 percent on December 15. The Fed has increased the federal funds rate in December, indicating that economy is back on track.
The central bank has suggested a faster pace of rate increases for 2017, reviving hopes about recovery of economy.
India’s decision to ban old notes has backfired leading to decrease in industrial and services output, said the poll.
It has led to mayhem in the economy, with factory activity and services badly affected during last December, amid fears of stagnation in the economy.
— DMS, IIT Delhi (@DMSIITD) December 28, 2016