Indian rupee depreciates over 5 per cent in 2015, may trade in 66-67.5 range

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Updated: December 18, 2015 5:41:47 PM

The year 2015 remained not as good as 2014 for Indian rupee as the currency depreciated over 5 per cent this year till December 17.

Indian rupeeIndian rupee fall was attributed to factors such as US Fed rate hike worries, China yuan devaluation in August and some foreign money outflow this year. (Reuters)

Like the year 2014, Indian rupee extended its losses in the ongoing calendar year as well with the currency falling over 5 per cent against the US dollar till December 17. The currency plunged 2.2 per cent during the same period in 2014.

According to market experts factors such as US Fed rate hike worries, China yuan devaluation in August and some foreign money outflow this year dampened sentiment towards the currency and took it towards to its two-year low.

Foreign institutional investors or foreign portfolio investors remained net sellers in the equity market segment as they sold shares of worth Rs 25,633 crore in the past six months till December 17.

After a long wait, the US Federal Reserve raised interest rates by 25 basis points this week due to recovery in labour market and firming signs of underlying economic growth.

India Ratings and Research believes, the US Federal Reserve’s decision to formally mark the end of its Unconventional Monetary Policy is a welcome sign of normalisation. The rates and currency market will stand to gain in the near term.

The way forward

On December 18, the rupee was trading 0.33 per cent up at 66.42 against the US dollar in the afternoon trade, according to the data available with the Reserve Bank of India.

Experts have mixed views on further movement of the Indian rupee. Citi in a research note said, “Improved macro fundamentals, positive real interest rates, strong external balance, FX reserve adequacy and low external debt are positives for Indian rupee.”

Naveen Mathur, associate director, commodities and currencies, at Angel Broking said, “Trend of rupee movement is looking slightly bearish due to the relative strength of dollar. Till March 2016, it will stay in the range of 66-67.5.”

Jameel Ahmad, chief market analyst,, said, “Bearing in mind that the Reserve Bank of India (RBI) has been extremely active with easing of monetary policy in 2015 and that the central bank are reportedly having to intervene in the Forex markets to defend further weakness in the Indian Rupee, it is looking unlikely that the Indian currency will be able to recover its momentum early next year. When you also consider that the highly-anticipated interest rate rise from the Federal Reserve should encourage capital outflows from the emerging markets towards US assets, this will also weigh on any potential for a recovery in currency momentum.”

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