CRISIL EXPECTS RUPEE TO REBOUND TO 71

Rating agency Crisil on Monday said there is a 50 per cent probability of rupee strengthening to 71 a dollar by the end of FY19 as it believes that the fall in oil prices and currency swap deal with Japan should provide some support to the rupee.

While the risks are tilted towards the downside in view of the rising interest rates in US, it however said there is a 35 per cent probability of the rupee settling at 74 per dollar, and a 15 per cent probability of it appreciating to 68.5 per dollar.

According to the rating agency, the rupee’s fall in 2018 has been less severe than 2013 despite greater intensity of global shocks.

The rupee’s fall over April- October has been 7.4 per cent compared with 13.5 per cent and 11.2 per cent in fiscals 2013 and 2014 respectively. This is despite the dollar appreciating at a much sharper pace by over 7 per cent as compared to 0.4 per cent in 2013.

“A lower depreciation despite bigger global shocks indicates the stronger underlying resilience of the economy relative to 2013. The shocks have increased, but vulnerability remains lower on most macro parameters. It also appears that the rupee is making up for the appreciation in the last two years. A back- of- the- envelope calculation shows the rupee would have settled around 71 by fiscal 2019- end had it continued to depreciate in fiscals 2017 and 2018 ( assuming an annual average depreciation rate of 2.5 per cent per year),” Crisil said.

Another factor that can turn the rupee’s fortunes is a change in investors appetite.