The Indian rupee is likely to strengthen towards 80 per dollar by the end of the year, registering its first annual appreciation since 2017, said Namrata Mittal, chief economist at SBI Mutual Fund“>Mutual Fund.
The strength in the local currency in the second half of the year may come amid easing oil prices and intervention by the Reserve Bank of India (RBI“>RBI), forecasts the largest asset manager in the country, Bloomberg reported.
The rupee has risen 0.8% this year, and is one of only two Asian currencies that has gained against the greenback. It is trading around 82.15 against the US dollar on Thursday.
The crude oil prices have fallen significantly with Brent oil hovering around $73 a barrel from levels of above $85 in early April.
The fall in oil prices is bolstering India’s current account, which typically relies on inflows to its equity market to help tide over perennial deficits. Surging services exports have also played an increasingly important role in recent months.
Also Read: India market-capitalisation touches record high in rupee terms; mid, smallcaps hit fresh highs
According to Mittal, the balance of payments, which was in a sharp deficit a few quarters ago, could be neutral thanks to a fall in commodity prices and services exports holding up well, Bloomberg reported.
While the RBI has previously been active in its accumulation of dollars to prevent a sharp appreciation in the rupee, Mittal argues a gradual strengthening would be acceptable for the central bank.
“RBI is not in favor of sharp movements,” she said, adding, “if there is sharp appreciation pressure they will intervene.”
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