The Indian rupee is most likely to beat Asian peers this year, according to Rabobank, a forecasting firm which expects the rupee to weaken the least compared to other Asian currencies.
The prediction is in contrast with other top forecasters who expect the currency to continue trailing.
The worst of the country’s economic slowdown has passed and the authorities are unlikely to use currency depreciation as a measure to revive growth, said Hugo Erken, head of international economics at the lender and the top rupee forecaster for the December quarter in Bloomberg’s rankings.
“India’s economy already has faced most of the economic pain in 2019, whereas many other Asian countries are still up for a shock,” Erken, who’s been working as an economist since 2002, said. “The rupee could weaken less than one per cent over the next 12 months, while Indonesia’s rupiah may fall seven per cent, Thai baht 11 per cent and the Malaysian ringgit nine per cent, he said.
Rabobank’s view is at odds with some of other top forecasters, including TD Securities and Kotak Mahindra Bank, who expect the rupee to trail Asian peers. Erken’s forecast is also at risk from a spike in the price of oil, India’s top import, as geopolitical risks continue to loom despite the US and Iran stepping back from a wider military conflict.
“Given the domestic macro and the recent geopolitical issues, the rupee will unlikely be the relatively better-performing currency,” said Suvodeep Rakshit, vice president at Kotak Institutional Equities in Mumbai.
The rupee was Asia’s second-worst performer in 2019 despite about US $18 billion inflow into Indian bonds and equities. The reason: the Reserve Bank of India mopped up net US $29 billion in the first ten months of the year as it built its reserves, according to the most recent data.
On January 10, the rupee gained 0.1 per cent to Rs 71.1325 per dollar, set to halt three straight weeks of losses.
On the other hand, Mitul Kotecha, senior emerging markets strategist, TD Securities, Singapore, said, “The RBI may not be overly concerned and in fact may favor FX weakness as a means to stimulate exports and the economy, as the pass through to inflation is relatively low.”
India’s economy is set for its slowest expansion since 2009, weighed down by a slump in spending.