The Indian rupee is expected to slide to the psychologically significant 100 per US dollar level if higher oil prices persist and pressure India’s external accounts, reported Bloomberg.
This statistic is important. The Pakistani rupee (PKR) first crossed the Rs. 100 per US$ mark in early 2013.
The Indian rupee has already fallen more than 7 percent this year and briefly approached the 97 level this week before the Reserve Bank of India helped limit losses.
The growing concern is being fueled by the impact of rising oil prices following the US-Iran conflict, as India remains one of the world’s largest crude oil importers.
International fund managers have warned that another spike in global oil prices could accelerate the rupee’s decline.
Despite the currency weakness, foreign investors have continued to add modestly to Indian bonds.
Data from the Clearing Corporation of India shows foreign holdings of index eligible bonds increased by about INR 20 billion in May, following inflows of roughly INR 50 billion in April. However, the pace remains well below January’s inflow of around INR 130 billion and follows a sharp outflow of nearly INR 190 billion in March.
Several major banks have revised their rupee forecasts lower. DBS Bank now expects the currency to trade in a range of 95 to 100 per dollar, while Citigroup sees it reaching 98 in the near term.
Investors are also closely watching whether the Reserve Bank of India would intervene more aggressively if the currency moves closer to the 100 mark.
