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Quote on Rupee 19 July 2022 By Ms. Sugandha Sachdeva, VP- Commodity & Currency Research, Religare Broking Ltd

The rupee has depreciated to record lows amid tightening monetary conditions and risk-off sentiments as well as persistent outflows witnessed from the domestic markets. Significant dollar demand from oil importers amid elevated crude oil prices as well as concerns about swelling trade deficit have also been the key catalysts behind the steep descent seen in the Indian currency, wherein it has breached past the pivotal 80 mark."

 “We do see some more pain for the domestic currency in the near term, but it is likely to remain cushioned by the 81 mark amid a host of factors. For one, the strength in the dollar index seems unsustainable at higher levels, with expectations that the European Central Bank and other developed market central banks will also hike interest rates aggressively. The long-term inflation expectations have fallen in the US, and concerns of super-sized tightening by the US Fed at the forthcoming meeting have eased, which is leading to a retreat in the dollar index from multi-year highs and aiding the local unit. Besides, the US central bank might be forced to pause its rate hike cycle going forward given the concerns about recessionary risks and it seems that the worst is likely to be over soon. Secondly, the RBI and the government have recently taken several measures which might stem the fall in the rupee. The rupee-dollar exchange rate is expected to hover in the 78.50 to 81 band till September.”

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