Rupee may hit 20.5 against dirham soon

mumbai — The relentless slide in India’s rupee has analysts rushing to rework their forecasts. With the currency setting one record low after another, lenders including DBS Bank Ltd are now predicting it will slide to as weak as 75 (Dh20.5) per dollar.

India’s trade deficit for August is likely to remain at $17 billion to $18 billion, while the Federal Reserve is set to raise rates again this month, both of which will weigh on the rupee, Philip Wee, a senior currency strategist at DBS, wrote in a note. UBS Securities India Pvt cut its year-end forecast to 73 from 66, while Scotiabank sees the rupee nearing 74 in the run up to the Fed meeting.

Right now, we can’t say that we have reached the end

Manu George, director at Schroder Investment Management Ltd

The sustained weakness in the currency has caused a mini-revival of foreign inflows into Indian bonds to splutter. Global funds sold $686.4 million of rupee-denominated debt in the week ended September 7, the most in four months. That’s also more than the combined $460 million of inflows in July and August.

“Right now, we can’t say that we have reached the end, and volatility and tension around flows in EM are likely to remain elevated,” said Manu George, director of fixed income in Singapore at Schroder Investment Management Ltd. The rupee slid to a new record of 72.6738 (Dh19.80) on Monday.