The battered Indian rupee will not recoup most of its recent losses over the coming year thanks to a persistent current account deficit and a central bank nearing the end of its rate-hiking cycle, a Reuters poll found.
A widening trade deficit driven by rising oil prices along with expectations for a prolonged U.S. Federal Reserve policy tightening cycle is partly responsible for a 11% year-to-date fall in the rupee to a record low of 83.29 per dollar in October.
Later on Wednesday, the Reserve Bank of India is due to raise its repo rate by a smaller 35 basis points to 6.25%, a separatepredicted, and is nearly done with a much more modest rate-hiking campaign that only began in May. No forecaster predicted the rupee stronger than 75 per dollar, where it started 2022, at any point next year.
"Given the very wide trade deficit, the mismatch in domestic demand with external demand, it calls for a slightly depreciated rupee...my sense is that the RBI would be comfortable with the levels where it is today," said Prithviraj Srinivas, chief economist at Axis Capital.
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