Biggest Rupee Bear Sees Asia’s Top FX Hitting One-Year Low

Parul Mittal Sinha

Source: Parul Mittal Sinha

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The Indian rupee, Asia’s best-performing currency this year, is going to slide right back to levels last seen in the depths of the pandemic meltdown, according to Parul Mittal Sinha at Standard Chartered Plc.

The currency will drop toward 76.5 to a dollar — about 4.4% weaker than current levels — by the end of the year, said the head of macro trading, India and South Asia financial markets. That is the most bearish forecast seen among analysts surveyed by Bloomberg, and runs counter to expectations for it to stay strong.

The rupee is a surprise winner in Asia this year as expectations of an economic recovery, a rare current-account surplus and massive foreign inflows have shielded it from the impact of rising U.S. yields. It has outperformed the Chinese yuan and the tech-reliant currencies of Taiwan dollar and the Korean won, which had all been forecast to keep gaining as the global economy rebounds.

“We expect the rupee to weaken in FY22 amid higher commodity prices, normalizing imports, increasing inflation, and continued central bank intervention,” said Sinha, who has spent more than a decade trading currencies and rates in London, Singapore and India.

The executive, who joined StanChart from Deutsche Bank India in 2019, sees the rupee losing some of its advantage going ahead. The current account will probably swing to a deficit in the fiscal year starting April, from an estimated surplus of 1.9% of gross domestic product in the current period as imports gain.

Higher oil prices will hurt, she said.

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