The fall in the Indian rupee to its weakest since September 2013 has left traders unruffled as they believe the country’s sturdier economy and central bank interventions will allow the currency to navigate a difficult global environment.
Earlier in the session, the rupee weakened to as much as 67.2550 to the dollar, a level last seen in September 2013, when the country suffered its worst market turmoil since the 1991 balance of payments crisis.
Although traders expect the rupee to weaken further to around 67.50 in the near-term as slumping oil prices and volatility in China’s market roil emerging market currencies, they say the currency will remain far above the record low of 68.85 hit in August 2013.
The RBI is also expected to intervene frequently, as it did on Thursday, with traders also anticipating more actions in futures markets after the central bank said in December it was open to that prospect.
“I think the RBI would generally be comfortable with the way the currency is behaving,” said Rahul Bajoria, regional economist with Barclays in Singapore.
“Inflation is under check and it will allow the RBI to let the rupee depreciate in a controlled manner, especially if the dollar continues to strengthen,” Bajoria said, adding that some depreciation in the currency would benefit exporters.
He expects the rupee to weaken to 69-70 to the dollar by the year-end.