Mumbai: The Indian rupee, emerging Asia’s worst performer in 2022, is likely to extend losses in the next fiscal year, according to a top private bank in the country.
“A substantially wider current account deficit” in the next fiscal year will keep the rupee under pressure, Neeraj Gambhir, group executive for treasury, markets and wholesale banking at Axis Bank Ltd., said in a Bloomberg TV interview. “We haven’t seen a meaningful reversal of capital outflows that we saw for the best part of (fiscal) 2023.”
The rupee declined over 10 per cent last year, weighed by a dollar bolstered by the Federal Reserve’s aggressive monetary policy tightening and India’s deteriorating external finances. The Reserve Bank of India may mop up any inflows to boost its foreign-exchange reserves, a move that may also work against the rupee, according to Gambhir.
“RBI has used up a fairly large amount of reserves through the last year to manage the pace of depreciation,” said Gambhir. “If there is a flow back of liquidity into domestic markets, that would be used to build back those reserves.”
He, however, doesn’t expect any runaway depreciation, but a milder 2 per cent-3 per cent drop in the fiscal year starting April 1. The rupee was trading steady at 82.57 to a dollar on Friday.
