Last Updated : 2018-10-20 18:21:55
INDIA could be braced to see its financial troubles deepen, with the rupee languishing even further before stabilising against the US dollar, according to an economic analyst. The rupee has been crippled by soaring oil prices and higher interest rates, with the crisis-hit currency losing around 15 percent of its value versus the American tender this year.
The Indian currency breached the 74-mark for the first time ever against the US dollar this month, but the worst could still be yet to come for the rupee.
Financial analysts are now wondering how low the rupee will continue to sink, as investors recoil over a significant amount of their gains in India being wiped out.
As of 16:00 BST, the rupee is currently trading at around 73.60, according to Bloomberg data.
Dharmesh Kant, Head Retail Research, IndiaNivesh Securities, predicted the Indian tender will eventually stabilise after losing more ground against the US greenback.
He claimed the rupee could record levels of up to 80 against the US dollar within just as little as six months.
Speaking to finance website MoneyControl, he said: “My own sense is that in the next 6 months, the rupee should stabilise between 72-74.
“However, in between, a spike towards 79-80 may happen.”
The Reserve Bank of India went against predictions from financial analysts as it held interest rates at the start of October.
The RBI's monetary policy committee (MPC) left the repo rate unchanged at 6.50 percent, with five out of six panel members voting to hold the rate
In its policy statement, the bank said: “Global headwinds in the form of escalating trade tensions, volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation outlook.”
Defending the decision, the bank said it was acting "to further strengthen domestic macroeconomic fundamentals”.
Marc Faber, veteran investor and publisher of the Gloom Boom & Doom Report newsletter, called on India to raise interest rates “meaningfully” to give the rupee some breathing space.
He said: “Either India has to increase interest rates meaningfully, which would mean that the economy would be hurt, or they obviously will have a weaker currency over time – and nobody can deny the fact that over the last 10, 20, 30 years, the rupee has been a weak currency.”
Earlier this week saw the Prime Minister of India issue a desperate call to oil producers to review payment terms to help ease concerns of soaring oil prices.
Oil prices have reached four-year peaks as the market focused on upcoming US sanctions on Iran while shrugging off the year's largest weekly build in US crude stockpiles.
India currently imports more than 80 percent of its oil needs.