Home » Rupee slips to 79.36 on current account deficit concerns

Rupee slips to 79.36 on current account deficit concerns

by EasyDailyCrypto News
0 comment 0 views

The Indian rupee on Tuesday lost 0.41 paise to close at 79.36 against the dollar on  concerns the current account deficit would widen more than anticipated after the trade deficit for June hit an all-time high. Moreover, the dollar continued to rule strong in expectation of aggressive rate hikes by the Federal Reserve.

Economists are pencilling in a CAD of 3.2-3.5% of the GDP for the current fiscal, far higher than the 1.2% in 2022. However, with the June trade deficit coming in at a record $25.63 billion, thanks to an increase in crude oil and coal imports, there is concern the CAD could be higher. Sonal Varma, economist at Nomura, wrote she expects the current account to remain on a deteriorating path in the next few quarters, due to a moderation in oil exports, steady domestic demand, inelastic demand for select commodities and a global growth slowdown.

“We forecast a widening of the current account deficit to 3.3% of GDP in FY23 from 1.2% in FY22,” Varma observed, adding that multiple headwinds, including weakening balance of payments dynamics, aggressive Fed hikes should drive the rupee weakness in coming months, with the currency at 82 by Q3 2022 and 81 by Q4 2022.

Foreign Portfolio Investors (FPI) have been on a selling spree since October, 2021. In 2022 so far, they have sold stocks worth $30 billion.

Related Posts

Leave a Comment