Indian Rupee Exchange Rate Forecast to Recover Against US Dollar

April 29, 2015 - Written by Tim Boyer

STORY LINK Indian Rupee Exchange Rate Forecast to Recover Against US Dollar

Indian Rupee Forecast to Recover Against US Dollar

The Indian Rupee has been weaker against its major peers over the past few sessions as the currency was negatively impacted by the earthquake in neighbouring Nepal and concerns that the strength of the Rupee is harming the nation’s exports.

Against the Euro, the Indian Rupee has appreciated by a quarter over the past year and that is having a negative effect upon India’s exporters. Thousands of gems and jewellery, leather, garment and handicraft exporters have suffered from the poor exchange rate.

A year previously, an exporter could expect to receive 80 Rupees for every Euro, now, however, an exporter receives just 67 Rupees per Euro. Because of the poor exchange rate, India has experienced its worst export performance since the global slump of 2009.

‘A case is building for Rupee depreciation. Otherwise, all indicators show we are entering another difficult year,’ said a senior trade ministry official.

The Indian Rupee was also weakened by increased end of month demand from Indian importers and banks. Against the US Dollar, the Indian Rupee is likely to recover from earlier losses as the session progresses as a string of disappointing economic data releases out of the world’s largest economy continues to weigh. If the Federal Reserve’s latest policy statement is more dovish than economists forecast than the US Dollar will decline against the majority of its peers including the Rupee.

Himanshu Arora of Religare said, ‘The USD-INR pair is expected to trade lower today on expectations that Greece will reach a bailout agreement soon. Improved risk appetite along with surging equities may dampen demand of dollar. Further, World Bank's statement that India is less vulnerable now than it was in 2013, may also support the rupee in the short term. Outcome of ongoing FOMC meeting is expected to offer more cues to Indian Rupee going forward. The range for today is seen between 62.85-63.35/dollar,’ he added.

Also putting pressure on the Indian Rupee was India’s failure to respond to rival Pakistan’s desire for good relations. The nuclear powers have been rivals for decades and India’s snub was seen as a negative. Pakistani Prime Minister Nawaz Sharif has made improving relations with India a priority.

The main driver of the Indian currencies movement will be the upcoming FOMC meeting. If the Fed policymakers deliver a dovish statement, the US Dollar will decline, as investors will raise their bets that the Fed will not hike interest rates until later than expected.

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