Barclays sees rupee falling to Rs72/dollar by 2018-end1 min read . Updated: 22 Jun 2018, 03:14 PM IST
Elevated oil prices and foreigners dumping Indian assets seen taking a toll on the rupee-dollar exchange rate, worse than what was seen in 2013
Mumbai: Barclays Plc has become the most bearish forecaster on the Indian rupee, predicting the currency will weaken more than it did during the taper tantrum five years ago.
The lender expects the rupee to decline to 72 per dollar by year-end as elevated oil prices dents government finances and foreigners dump Indian assets. Hitting the target would mean an annual drop of 11.3% for the currency, worse than that seen in 2013. The prediction is also more bearish than the 67.52 median forecast in a Bloomberg survey.
“India’s difficulty in attracting portfolio flows is exacerbated by poor bond market, unclear policy communication by the Reserve Bank of India and rising political risks ahead of the 2019 election," analysts Hamish Pepper and Dennis Tan wrote in a note Thursday. Barclays’ earlier forecast was 69 per dollar.
The sentiment has reversed from a year ago when analysts said emerging-market currencies were better prepared to endure a selloff when major central banks start withdrawing stimulus because of healthy public finances and subdued inflation. But elevated oil prices and hardening global yields has spurred global funds to pull $6.7 billion from Indian stocks and bonds this year, sending the rupee to the brink of its 2016 record low.
“India’s wider current account deficit, driven by higher oil prices and demand for capital import, will be increasingly difficult to fund, given the increased return competition posed by higher USD rates for EM debtors," the analysts wrote.