After months of wild volatility in the rupee, India’s widening trade deficit and elevated commodity prices are bearing down on the currency, reinforcing a recent downward bias and pushing it towards a new low for the year.
That is the view of traders who have seen the rupee whipsaw from being Asia’s best performer in the first quarter to its worst in April when another wave of Covid-19 infections took hold.
This volatility and the prospect of tapering by the US Federal Reserve have also reduced the attractiveness of India’s currency for carry trades, adding to the headwinds it is facing.
“We expect oil and broader commodity complex prices to remain elevated in the short term, which will weigh on India’s trade balance,” said Parul Sinha, head of Indian financial markets and macro trading for South Asia at Standard Chartered.
“We maintain a bearish view on the rupee.”
Standard Chartered and RBL Bank forecast that the currency will depreciate to 76 rupees per US dollar by the end of the year while their peers at Deutsche Bank have a slightly less pessimistic projection of 75.
The rupee was trading at 74.4563 to the dollar on Monday while Brent crude, the benchmark for India’s oil imports, was above $75 a barrel, up more than 45 per cent since the start of the year.
Amid the devastating human toll that the coronavirus is taking in India, the rate of increase in new infections is slowing, which is improving the prospects for reopening the economy.
But as the Covid curve flattens and consumers and businesses become more active, demand for imports is also set to increase, weighing on the currency.
Updated trade data due on Thursday is expected to confirm that the deficit widened to $9.4 billion in June, from $6.3bn in May. Kotak Mahindra Bank estimates that billion dollar deficits will continue and average in the “double digits” as the economy reopens.
Technical indicators also point to further depreciation of the currency given that the dollar-rupee’s moving average convergence-divergence gauge, a measure of momentum, remains above zero in bullish territory.
The pair has room to run before reaching resistance at April’s peak of 75.3362.
RBL Bank’s domestic markets head Anand Bagri, who expects the rupee to weaken, sees pockets of support for the currency, including inflows for equity offerings.
Notable among these is a $1.3bn initial share sale from Zomato and Paytm’s bid for shareholder approval of a $2.2bn stock sale that would set in motion the process for the country’s largest market debut.
The Reserve Bank of India also has currency reserves worth $600bn to draw on to curb any sharp fall in the rupee.
‘”We expect the RBI to remain proactive with its FX intervention strategy to ensure limited volatility in the rupee and to prevent excessive rupee depreciation from feeding into inflation,” said Kaushik Das, chief India economist at Deutsche Bank.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
UAE currency: the story behind the money in your pockets
Financial considerations before buying a property
Buyers should try to pay as much in cash as possible for a property, limiting the mortgage value to as little as they can afford. This means they not only pay less in interest but their monthly costs are also reduced. Ideally, the monthly mortgage payment should not exceed 20 per cent of the purchaser’s total household income, says Carol Glynn, founder of Conscious Finance Coaching.
“If it’s a rental property, plan for the property to have periods when it does not have a tenant. Ensure you have enough cash set aside to pay the mortgage and other costs during these periods, ideally at least six months,” she says.
Also, shop around for the best mortgage interest rate. Understand the terms and conditions, especially what happens after any introductory periods, Ms Glynn adds.
Using a good mortgage broker is worth the investment to obtain the best rate available for a buyer’s needs and circumstances. A good mortgage broker will help the buyer understand the terms and conditions of the mortgage and make the purchasing process efficient and easier.
Omar Yabroudi's factfile
Born: October 20, 1989, Sharjah
Education: Bachelor of Science and Football, Liverpool John Moores University
2010: Accrington Stanley FC, internship
2010-2012: Crystal Palace, performance analyst with U-18 academy
2012-2015: Barnet FC, first-team performance analyst/head of recruitment
2015-2017: Nottingham Forest, head of recruitment
2018-present: Crystal Palace, player recruitment manager
THE BIO
Favourite car: Koenigsegg Agera RS or Renault Trezor concept car.
Favourite book: I Am Pilgrim by Terry Hayes or Red Notice by Bill Browder.
Biggest inspiration: My husband Nik. He really got me through a lot with his positivity.
Favourite holiday destination: Being at home in Australia, as I travel all over the world for work. It’s great to just hang out with my husband and family.
Jewel of the Expo 2020
252 projectors installed on Al Wasl dome
13.6km of steel used in the structure that makes it equal in length to 16 Burj Khalifas
550 tonnes of moulded steel were raised last year to cap the dome
724,000 cubic metres is the space it encloses
Stands taller than the leaning tower of Pisa
Steel trellis dome is one of the largest single structures on site
The size of 16 tennis courts and weighs as much as 500 elephants
Al Wasl means connection in Arabic
World’s largest 360-degree projection surface
The Uefa Awards winners
Uefa Men's Player of the Year: Virgil van Dijk (Liverpool)
Uefa Women's Player of the Year: Lucy Bronze (Lyon)
Best players of the 2018/19 Uefa Champions League
Goalkeeper: Alisson (Liverpool)
Defender: Virgil van Dijk (Liverpool)
Midfielder: Frenkie de Jong (Ajax)
Forward: Lionel Messi (Barcelona)
Uefa President's Award: Eric Cantona
The Penguin
Starring: Colin Farrell, Cristin Milioti, Rhenzy Feliz
Creator: Lauren LeFranc
Rating: 4/5
UAE squad
Esha Oza (captain), Al Maseera Jahangir, Emily Thomas, Heena Hotchandani, Indhuja Nandakumar, Katie Thompson, Lavanya Keny, Mehak Thakur, Michelle Botha, Rinitha Rajith, Samaira Dharnidharka, Siya Gokhale, Sashikala Silva, Suraksha Kotte, Theertha Satish (wicketkeeper) Udeni Kuruppuarachchige, Vaishnave Mahesh.
UAE tour of Zimbabwe
All matches in Bulawayo
Friday, Sept 26 – First ODI
Sunday, Sept 28 – Second ODI
Tuesday, Sept 30 – Third ODI
Thursday, Oct 2 – Fourth ODI
Sunday, Oct 5 – First T20I
Monday, Oct 6 – Second T20I
Sholto Byrnes on Myanmar politics
The specs: 2018 Maxus T60
Price, base / as tested: Dh48,000
Engine: 2.4-litre four-cylinder
Power: 136hp @ 1,600rpm
Torque: 360Nm @ 1,600 rpm
Transmission: Five-speed manual
Fuel consumption, combined: 9.1L / 100km
Andor
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