Crisil sees Re racing back to 71 levels by March

The rupee may appreciate to 71 against the dollar by March 2019 on positives like the dip in crude prices and the USD 75-billion currency swap with Bank of Japan, says a report. Pegging 71 to a dollar as its base case, rating agency Crisil said Monday there is a 50 per cent probability for the rupee to be at that level by March 2019.

"The falling oil prices and the currency swap deal with Japan should provide some support to the rupee," it said. The report said there is a 35 per cent probability for the rupee settling at 74 against the dollar in the same time period and there is only a 15 per cent likelihood of its appreciating to its earlier target of 68.5 against the greenback.

Over the weekend, it can be noted that Swiss brokerage UBS had forecast that the rupee might sink to 76 over the next three months. The rising interest rates in the US is among the biggest risks for the rupee as capital outflows will continue in such a scenario, it added.

The rupee has lost nearly 15 per cent since April this year, which has seen it breach lifetime lows against the dollar of 74.49 against the dollar. It has regained a bit of the lost ground in the last few trading sessions.

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After two sessions of gains, the rupee Monday again tumbled by 67 paise to close at 73.12 against the dollar. Crisil argued that the situation is not similar to the one in the summer of 2013, the last episode of the rupee being under pressure, when the currency had lost 27 per cent in a matter of 83 days.

"The rupee depreciation in 2018 has been less severe than 2013 despite greater intensity of global shocks," it said, pointing out that this indicates the stronger underlying resilience of the economy relative to 2013. It said crude oil has already gone up to USD 75.3 a barrel levels as of October 31, up from USD 86.1 a barrel on October 4, which should help the rupee.

However, pressure continues in the form of rising interest rates in the US, it said. At present, global risk aversion is causing investors to flee emerging markets and countries with a wider current account deficit are the most punished ones, it said.

If the investor appetite changes to look at emerging markets positively, India stands better placed with strengths like higher GDP growth, lower inflation, high forex cover and better policy stability, it said.