Biggest Fund Manager in India Sees Rupee Ending Five-Year Slide

India’s largest asset manager is forecasting a stronger performance for the rupee in the second half of the year, helped by easing oil prices and cooling intervention by the central bank.

(Bloomberg) — India’s largest asset manager is forecasting a stronger performance for the rupee in the second half of the year, helped by easing oil prices and cooling intervention by the central bank.

The currency will probably strengthen to 80 per dollar by the end of the year, according to Namrata Mittal, chief economist at SBI Mutual Fund, its first annual appreciation since 2017. The rupee is up 0.8% this year, and is one of only two Asian currencies that has gained against the greenback. It closed 0.3% stronger on Wednesday at 82.1062.

 

A slump in crude oil prices is bolstering India’s current account, which typically relies on inflows to its equity market to help tide over perennial deficits. Surging services exports have also played an increasingly important role in recent months. 

“The balance of payments, which was in a sharp deficit a few quarters ago, could be neutral thanks to a fall in commodity prices and services exports holding up well,” Mittal said. 

While the Reserve Bank of India has previously been active in its accumulation of dollars to prevent a sharp appreciation in the rupee, Mittal argues a gradual strengthening would be acceptable for the central bank. 

“RBI is not in favor of sharp movements,” she said. “If there is sharp appreciation pressure they will intervene.” 

Other analysts have voiced similar sentiment. Citigroup forecasts the rupee to bounce back from all-time lows as the RBI slows its dollar purchases, while Bloomberg Intelligence predicts the currency to strengthen to just below 80 per dollar by March 2024.

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