Rupee hits fresh record low against USD, may drop to 87 by March end: Experts

ANI January 13, 2025 191 views

The Indian rupee has hit a record low against the US dollar, with experts predicting it could drop to 87 by March end. This unprecedented 16-week decline is driven by rising treasury yields, crude prices, and global economic dynamics. Market experts like Akshay Chinchalkar and Ajay Bagga provide insights into the complex factors behind the rupee's weakness. The situation reflects broader trends of US economic exceptionalism and competitive currency devaluation among emerging markets.

"As per implied volatility trends, there are 80 per cent odds that the currency will drop to 87 between now and March-end" - Akshay Chinchalkar, Axis Securities
Rupee hits fresh record low against USD, may drop to 87 by March end: Experts
New Delhi January 13: Indian rupee touched an all-time low against US dollar. At the time of filing this report, the rupee was trading at 86.40 against US dollar.

Key Points

1

Rupee drops for unprecedented 16 consecutive weeks

2

Global dollar advance fuels currency weakness

3

US economic exceptionalism impacts emerging markets

Experts say the volatility trends show that the rupee will drop to 87 by March end.

"As per implied volatility trends, there are 80 per cent odds that the currency will drop to 87 between now and March-end, up from 27 per cent a month ago." says Akshay Chinchalkar, Head of Research, Axis Securities.

Akshay adds that rising treasury yields and surge in crude prices has dampened the outlook for the Indian currency. The rupee has dropped for 16 straight weeks, which has never occurred in its history.

"India's Rupee slumped beyond 86 this morning as a global dollar advance fueled by rising treasury yields and a surge in oil further dampened the outlook for the rupee. Offshore markets continue to bet against the rupee via options, where dollar-rupee out-of-the-money calls have been traded aggressively last week. The rupee has now dropped for 16 straight weeks, which has never occurred in its history," he said.

Ajay Bagga Banking and market expert disagrees and says, rupee is facing pressure in line with other global currencies. In 2024, it has performed better than other emerging markets (EMs)

"The Rupee is facing pressure in line with other global currencies. In CY2024 the rupee was a relative outperformer versus other EMs. In 2025 we are seeing the continuation of US economic and bond yield exceptionalism which is leading to further strength in the US dollar and global currencies weakness." said Ajay Bagga Banking and market expert

Indian rupee has been under pressure since last few months due to various domestic as well as international factors. These include India's sluggish growth, outflows by foreign investors from Indian equities, and the strengthening of the dollar index after Donald Trump announced tariff plans, among others.

US dollar index rises to 109.98, highest since November 2022. Bagga said U.S. exceptionalism and EMs devaluing their currency to keep export competitiveness are reasons for rupee weakness.

"This US exceptionalism is the main reason for rupee weakness. Moreover, there is competitive devaluation as well, as to keep export competitiveness, EMs try to keep their currencies in a broad band with respect to export competitors, China for example used currency depreciation as a strategy in 2018 to counter Trump tariffs. India has to be a market follower in this scenario to keep its exports competitive" said Bagga

FPIs pulling out funds from the Indian markets is also putting pressure on rupee.

Tags:
You May Like!