The rupee completed the year at 82.72 per dollar, down from 74.33 at the end of 2021, while the dollar index was on track for its highest yearly rise since 2015. On Friday, the Indian rupee finished the final week of a difficult year in the green, as the dollar index fell and optimism that the country’s current account deficit had likely peaked for the time being gave some support.
The rupee ended the session up 0.09% at 82.72 per dollar, maintaining its rangebound behaviour. With minor increases this week, it gained for the first time in four weeks.
The rupee, on the other hand, has fallen 10.14% this year, the most since 2013, making it the second worst-performing Asian currency. The dollar’s massive gains, fueled by the U.S.
The Federal Reserve’s tightening monetary policy hammered global currencies in 2022.
In the short term, there is some optimism in the market due to China’s reopening, and if the virus wave subsides, activity might rebound significantly, according to Anindya Banerjee, head of research – FX and interest rates at Kotak Securities.
When combined with “Despite the fact that financial markets had a difficult December, there is potential for a January rise. If this occurs, a soft dollar may be on the horizon, putting downward pressure on USD/INR values.” Traders and economists predicted that the rupee will trade in a band of 81.50-83.50 during the following three months. The currency touched a record low of 83.29 in October. On Friday, Asian stocks and currencies mainly climbed as data from the United States revealed that the Federal Reserve’s rate rises were moderating inflationary pressures.
The dollar index dipped to 103.860, although it remained on track for its best year since 2015.
Economists predicted that the worst of India’s current account deficit (CAD) difficulties may be behind us for the time being, after it set a record in absolute terms in the September quarter. “Despite expected lower exports through 2023, we expect the CAD to considerably decrease in the following quarters, driven by declining costs for energy and other commodity imports,” Barclays analysts wrote in a note.
“We cut our current account deficit prediction for fiscal 2024 to $95 billion (2.6% of GDP) from $105 billion before.”