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'Rupee likely to depreciate further to 78/USD in 2019'

Thursday, February 07, 2019

The rupee may depreciate to 78 per US dollar this year, largely owing to widening fiscal and current account deficits, which are the biggest pain points for the domestic currency.

According to Karvy's Annual Commodity and currency report 2019, this is expected to be a "mixed year" for the commodities and currencies market and the rupee may depreciate further on account of twin-deficits.

"USD/INR is expected to move higher with a base of 68 to 69.50, with an upside at 73.70-74.50," Ramesh Varakhedkar CEO Commodities and Currencies at Karvy told reporters.

He further noted that if the Indian rupee crosses the 74.50 level, then it is very likely that the domestic unit will depreciate further towards the 78 level in 2019.

Moreover, going ahead into the election year, both foreign institutional investors (FIIs) and foreign direct investors (FDIs) would try to avoid the Indian markets as the uncertainty about election outcome increases.

"We generally see private investments slow down during an election year, leaving no chance for current account deficit (CAD) or balance of payments (BOP) to recover in second half of FY19," the report noted.

Rupee ends flat at 71.56 per dollar
The rupee yesterday ended almost flat at 71.56 per US dollar as participants preferred to wait for the Reserve Bank's interest rate decision for further cues.

At the Interbank Foreign Exchange market, the rupee moved between 71.68 to 71.49 during the session, before finally ending at 71.56, showing a gain of just 1 paise.

"This week, there are relatively thin volume trades in currency markets, as many Asian markets are shut on Lunar New Year," HDFC Securities Head, PCG and Capital Markets Strategy, V K Sharma said.

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