Comments
The year 2022 has been one of the worst for the Indian rupee in the last nine years. The domestic currency has tumbled over 10 per cent so far against the US dollar. With just three trading days left on the calendar year 2022, it will be the fifth consecutive year of fall and the worst year since 2013.
Looking back
It was a very volatile year for the global financial markets. Russia-Ukraine war and the global central banks winding up the easy money and increasing the interest rates at a much faster pace than anticipated weighed on the global financial market.
The US dollar index surged 20 per cent in the first three quarters of this year. It made a high of 114.78 in September and has been coming down since then. The index is currently at 104, up 8.7 per cent for the year so far. The strength in the US dollar dragged rupee to a new low of 83.29 in October. The rupee has recovered slightly from there and is currently at 82.85, down 10.3 per cent for the year.
Performance report
Among the major currencies, the Japanese Yen has been beaten down the most this year. The Yen is down over 13 per cent against the dollar. British Pound is down 10.5 per cent, and the Euro down 6.32 per cent. The fall in the dollar index this quarter has aided the euro to recover some of the loss.
The Indian rupee has been the worst performer among the major Asian countries. The Chinese Yuan and the Indonesian Rupiah are down 8.7 and 9 per cent, respectively.
Outlook
There is limited room on the downside for the dollar index (104) from the current levels. A significant support is coming up at 102. A strong bounce from here may have the potential to take the index up to 108 in the first quarter of 2023. Thereafter we can expect dollar index to reverse lower again. That leg of fall might take the index below 102 towards 100 or even lower next year. The fall to 100 will get negated only if the dollar index manages to breach 108 decisively.
On the domestic front, the Indian rupee is still weak. For the short-term, cluster of resistances are poised in between 82 and 81 for the rupee. As long as the rupee stays below these resistances, the outlook will remain negative. There is room for the rupee to weaken further towards 84.50-85. The rise to 108 on the dollar index can trigger this fall in the rupee.
However, thereafter there are good chances to see recovery in the rupee. That recovery move can take the domestic currency back to 83-82 and even higher.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.