TIWN
New Delhi, March 13 (TIWN) High commodity prices as well as outflow of foreign funds from equity markets combined with the Russia-Ukraine war are expected to keep the Indian rupee subdued in the short to medium term.
The trend is expected to widen India's current account deficit to over $20 billion in Q3FY22 from $9.6 billion in Q2FY22. At present, the crisis has led to a global spike in international prices of crude oil, natural gas, coal, nickel, copper, aluminium, titanium and palladium. Moreover, India is a major importer of these precious as well as industrial commodities. Furthermore, the spike in commodities' costs is expected to trigger an inflationary trend and ultimately a reversal in monetary policy. This will further accelerate FIIs' selling in the Indian equity market. "Rupee is expected to remain weak. However, de-escalation in the crisis shall be positive for the rupee," said Sajal Gupta, Head, Forex and Rates, at Edelweiss Securities. "In India, FPIs have sold almost $13 billion this year itself, which has added pressure on the rupee." On last Friday, the rupee closed at 76.5950 to a USD. Just a few days ago, the rupee had hit its record low at 77 to a greenback. However, interventions by the Reserve Bank might cap the downside to rupee against the USD.
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