2017 may see India rupee at 19 versus Dh1

hong kong — India’s currency is poised to weaken this year as the central bank seeks to cushion the economy from excessive appreciation, according to Deutsche Bank.

Though the rupee hit a record low in November, it was broadly stable through the year, slipping just 2.7 per cent against the dollar. In real effective terms, which adjust for inflation differences and measure the currency against trading partners’ counterparts, it climbed about 16 per cent from the end of 2013 through 2016, according to the Bank for International Settlements.

The relative stability of the rupee last year reflected India’s low trade and current-account deficits and a surge in foreign direct investment inflows, the Deutsche bank analysts said.

The economists forecast that the rupee, which was at 68.04 per dollar late Friday, will fall past the 70-mark (below Rs19 versus Dh1) this year. Along with prospects for US Federal Reserve interest-rate hikes that boost the dollar, they anticipated the RBI will take opportunities to bolster its foreign-exchange reserves during the year — selling rupees in the process.

“With global financial markets expected to be volatile in the period ahead, the RBI would need to buy dollars at every opportune moment to shore up more reserves,” analysts Das and Baig wrote. — Bloomberg