By Saloni Dhanuka
The rupee is on track to weaken for the sixth straight month in July, it’s longest losing streak in over 16 years. The pressure, however, is easing.
The Indian currency is the worst performer among Asian peers so far this year, having depreciated more than 7 percent—it hit a lifetime low of 69.1263 on July 20. But the pace at which it was weakening against the dollar has slowed.
The rupee depreciated 0.3 percent in July compared with 1-2 percent in each of the previous three months. That’s because two key headwinds of a selloff by foreign investors and rising fuel prices have abated. Moreover, the central bank also intervened to stem the slide.
Foreign investors have pulled out Rs 46,000 crore from both debt and equity markets so far in 2018. But they turned net buyers in July, according to the data available on NSDL’s website.
A strengthening dollar index, an improving U.S. economy with expectations of a gradual rate hike, a widening trade deficit and a rise in crude prices have weighed on the Indian currency, according to K Harihar, head of treasury at First Rand Bank. But things may start looking up now and trade in the 68-69 per dollar in the near term, he said. July has seen the lowest foreign fund outflows in the last four to five months and crude has come of the $80 levels, he said.
The rupee would hover in the range of 67-71 and 66-72 against the dollar in the next two quarters, respectively, according to Bloomberg estimates.
The Reserve Bank of India’s intervention in July brought some relief but softening crude oil price largely supported the rupee, said Bhaskar Panda, senior vice president, regional treasury advisory group, at HDFC Bank. He expects the rupee to remain range bound at 68.30-69.