On the strength of positive macroeconomic developments and views that the U.S. Federal Reserve is reaching the end of its rate hike cycle, the rupee will maintain its current gains versus the dollar in the next months and will strengthen somewhat in a year, according to a Reuters poll.
The Reserve Bank of India (RBI) ended an already small rate hike cycle much earlier than many of its competitors, but the rupee is still up about 1% for the year thanks to significant inflows of foreign money and a more optimistic view for the economy.
According to a different Reuters survey, the third-largest economy in Asia was projected to rise 6.1% this fiscal year, making it the fastest-growing big economy in the entire world. The rupee has been trading in a narrow range of 80.88-82.95 this year as a result of the RBI’s regular interventions, which have prevented it from falling but also from rising excessively.
According to the median predictions of 40 strategists in a survey conducted on July 3–5, the rupee will trade at 82.00/dollar in one and three months, 81.80/dollar in six months, and 81.00/dollar in a year. The outlook is much the same as it was last month. On Wednesday, the rupee’s exchange rate was roughly 82.22/dollar.
The rupee was predicted by about two-thirds of the economists surveyed to be at 82.00/dollar or below in one month, and none predicted it would rise over 81.50. 27 out of 37 analysts, or more than 70%, predict that in a year, the dollar will trade at an average rate of 82.00 per euro. Only two forecasted a decline below 80.00/dollar.
According to Sakshi Gupta, principal economist at HDFC Bank, “the U.S. central bank has indicated there may be two more rate hikes.” The rupee could go back towards 83 if the labour market and inflation data turn out to be unfavorable, which would pose a risk to the prediction.
