With impending hardening of rates in the US, likely less intervention by RBI, market mavens see the currency touching 66 to a dollar this year
The strength of the dollar is expected to determine the level of the rupee in 2015.
As US growth revived and rest of the world slowed, the dollar ended 2014 with a gain of 12% against a basket of major currencies. It may strengthen further this year on anticipated US interest rate hikes, market experts said.
A treasury head of a corporate house said, "Depreciation of the rupee is something that the Reserve Bank of India will also not mind or else the country will be flooded with cheap imports. A depreciating currency insulates the trade deficit, which is ballooning, and will cover up the drop in our exports. Interventions from the RBI will also will be very few and far in between. We expect the rupee to reach Rs 66 to the dollar."
India's trade deficit in November jumped to an 18-month high of $16.86 billion.
The dollar index last stood at 89.950, having touched a high of 90.325 on Tuesday, its strongest level since April 2006. Against the yen, the dollar held steady on the day near 119.53 yen. The dollar had touched a one-week low of 118.86 yen on Tuesday, having pulled back from a seven-year high of 121.86 yen in early December. The euro held steady at $1.2159, hovering near a 29-month low of $1.2123 on Tuesday.
Hitendra Dave, head of treasury at HSBC, told dna, "The dollar will be an outperformer against all emerging market currencies. But the rupee is expected to fare better than other emerging market currencies as inflation is slowing, fiscal deficit is under control and current account deficit is on expected lines."
Pumped up by strong FII flows, the rupee reported strong gains in first half of the year peaking at an 11-month high of Rs 58.33 to the dollar in May. But it lost ground on account of high imports, particularly of gold, and hit a low of Rs 63.89 to the dollar in December due to expected reversal in interest rates in India. The rupee ended the year with 2.3% drop, but fared much better than a 12.6% loss in the previous year.
Siddharth Rath, head of treasury, Axis Bank, said, "Interest rates in the US are expected to reverse and the growth is picking up in the US so the foreign institutional investors are going to concentrate on a stronger economy rather than come to the Indian shores. The domestic demand will keep the growth going in India but the buoyancy in the markets may be tepid in 2015. The US interest scenario will decide the rupee level."
The Australian and New Zealand dollars ended 2014 sharply lower and could remain under pressure this year if commodity prices stayed weak. The Australian dollar was slightly firmer at $0.8206 on the last trading day of the last year, having bounced 0.6% on Tuesday, in part thanks to rally in iron ore, the country's top exports earner.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}