The Indian rupee is depreciating as money shifts away from domestic stocks and towards China and as geopolitical concerns drive up oil prices. This month, the rupee dropped past 84 to the dollar and reached a new record low.
According to Barclays Plc, the central bank may permit the rupee to fall because of record-high gold prices, a stronger dollar, and heightened risk aversion. While researcher QuantEco Research aims for 84.50 and Kotak Mahindra Bank Ltd. anticipates a drop to 84.25, the lender anticipates a gradual reduction towards 84.40 per dollar.
Global headwinds from geopolitical uncertainties and the US’s slower rate of monetary easing despite strong data are anticipated to have a short-term negative impact on the currency, according to Upasna Bhardwaj, chief economist at Mumbai-based Kotak. According to her, this uncertainty is reflected in the outflow of foreign portfolios from India and other EMs as money shifts to China in the expectations of its recovery.
This month, international funds withdrew $9.1 billion from Indian stocks due to high valuations and a move towards China. Even India’s index-eligible bonds had two weeks of losses this month after attracting over $2 billion in monthly inflows since being added to international bond indexes in June.
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