Indian Rupee in free fall? NRIs may get Rs19 for Dh1

This morning, Dh1 is fetching you Rs16.62, but forex experts believe the Indian Rupee will continue to fall against the dollar.

Experts put the Rupee touching a low 63 to a dollar in the fourth quarter 2014 but decline could be as low as 71.

 “Already the Indian has established its weakness by breaking its trend line support available on daily charts. Weakness may further get accelerated if INR closes above 62,” Mazhar Mohammad, Technical Research Strategist, Chartviewindia.in, wrote in Economic Times.

“Based on the weight of technical evidence with us, we expect the Rupee to continue its bear market and hit a new low of 71 to the US dollar," he added.

The recent appreciation in rupee from the lows of 68.80 registered on August 2013 is appearing like a fourth wave of one lower degree, Mohammad said, which should eventually pave the way for one more leg on the down side, which in idealistic conditions should take rupee below the levels of 68.80.

Since the lows of 2007, the Indian rupee has witnessed four multi-month rallies that appreciated by around 10 per cent on two occasions and by around 15 per cent on another two occasions including current appreciation from the lows of 68.80, Chartviewindia.in analyst said.

Separately, the Bank of Nova Scotia in its October report said that the Indian Rupee has surprising shown stability in September, despite being pressured by rising US yields and the less than favourable trade dynamics of increased core (non-oil, non-gold) imports plus a loss of momentum in export growth.

The bank expects the Rupee to continue to be pressured by rising US yields and target 63.00 by Q4 2014.

In September, Standard and Poor’s raised outlook on India’s sovereign rating to stable from negative, citing the India PM Narendra Modi-led government’s “willingness and capacity to implement reforms necessary to restore some of India’s lost growth potential.”

However, all experts don’t view a sharp decline.

“The rupee is likely to move towards 64 sometime between now and March 2015, but such a slide will not continue towards 68 a dollar and instead stabilise,” Samir Lodha, Managing Director, QuantArt Market Solutions told Business Standard.

Phani Shankar, head of financial markets at ING Vysya Bank Limited, said the medium-term story for the rupee remains “strong”, which should prevent a sharp or disorderly move in the currency.

“There are many things going in favour of the rupee currently—stable macros, significant additions to reserves, growing confidence in the economy, and a significant correction in commodity prices. But there is the backdrop of dollar strength, and the potential risk that it causes to other asset classes,” Shankar revealed.

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