Rupee This Week: Indian currency may continue to depreciate further – check reasons, expectations, and history

Rupee This Week: The depreciation in Indian Rupee is likely to continue with the domestic currency breaching the 83 mark this week amid multiple negative factors including the rising dollar index, analysts said in their expectations while citing reasons for the fall of the rupee.

The rupee pared most of its initial losses and settled 4 paise lower at a fresh lifetime low of 82.34 (provisional) against the US dollar on Monday, weighed down by risk-averse sentiment among investors.

Reasons For Rupee Depreciation

The Indian rupee has plunged to a record low amid the risk-off sentiments in the market and as the restrictive policy stance of the US Fed looks to continue. The recent jobs data points to a robust US labor market giving further room to the US Fed to aggressively hike interest rates, Sugandha Sachdeva, Vice President - Commodity and Currency Research, Religare Broking said.

This is buoying the US dollar and has suppressed the Indian rupee. Besides, higher demand from oil importers amid the revival in crude oil prices on the back of deep supply cuts is leading to worries about a widening current account deficit, estimated to swell to around 3% of the GDP, she added.

Rupee Expectations

“The rupee is likely to continue to be depreciation mode in this week as well amid a strong dollar and risk aversion in global markets. The dollar is gaining strength as improved economic data from US signals economic recovery,” Pankaj Pandey Head – Research ICICI Securities said.

US$INR traded in upward resistance and support wedges and broke resistance wedges to start a new upward trend, Pandey said. “The pair is expected to continue trading in the upward trend towards the level of 83.00 after breaking the key resistance level of 82.50 this week.”

Rupee History

The local currency in the last one year has declined by over 9 per cent as compared to the American dollar, while it dipped almost 3 per cent in the last one month and over 1 per cent in the last week, as per domestic brokerage JM Financial’s report on currency and derivatives.