Rupee expected to weaken more in coming months
Subscribe to enjoy similar stories. Mumbai: The rupee is expected to further weaken in the coming months as Trump’s presidency strengthens the dollar at least in the near-term, experts said, adding that the central bank's interventions in the currency market are likely to ease. In 2024, the local currency lost 2.9% but the depreciation was lower than some of the other Asian currencies.
According to Bloomberg data, yuan lost 3% against the dollar in the same period. Experts said that the lower depreciation so far when compared to other currencies is also a reason why there is room for more correction. While some see rupee touching the 87-levels in the next three-four months, others see the rupee holding its own after 86.2.
On Thursday, it closed at 85.75. “There is a pending depreciation pressure visible on the rupee and that is seen in the REER overvaluation of around 8%," said Kanika Pasricha, chief economic advisor, Union Bank of India. “…we have depreciated in the recent dollar index spike relatively less compared to our trade partners." The real effective exchange rate (REER) is an inflation-adjusted trade-weighted average value of the domestic currency in terms of its trading partners’ currencies.
Since 5 November, the euro has weakened over 5.3% against the dollar, yuan 2.7% but the rupee has depreciated about 1.8%, said Pasricha, referring to the movement in currencies following Donald Trump's win in the US presidential election. Trump has promised a 60% tariff on Chinese goods and a loose fiscal policy, although whether he goes through with these would be clearer on or after 20 January when he assumes office. “On a long-term basis,the rupee is still a depreciating currency from the economic fundamentals
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