Indian rupee
Image Credit: Pixabay

Dubai: The Indian rupee, right now the worst performing Asian currency, may suffer further setbacks. The currency has shed 3 per cent of its value in the past three weeks. It depreciated by half a per cent on Thursday and traded at 71.815 against the dollar.

A dirham fetched 19.50 rupees compared to 19.44 in the previous session. Much of the weakness could attributed to outflows from foreign investors, who had positioned themselves in anticipation of a Modi win during the elections that happened in May. However, investors are taking money off the table as the economy slows and valuations look stretched.

The weakness in the currency was further exacerbated after the US Federal Reserve cut interest rates last month. “We believe that the India rupee could hit 72.30 against the US dollar in the coming week. Various factors such as global market fluctuations, ensuing trade conflict, RBI monetary policy and crude oil prices can further dictate the movement,” said Adeeb Ahamed, Managing Director at LuLu Financial Group.

“If the already weakened euro and pound sterling fall further, the rupee can reach 72.80 against the dollar. Trade restrictions will put further strain on European currencies and that can be a major factor for weakening of currencies in Asia.”

On Thursday, the dollar index was up 0.04 per cent to be at 98.33. The index has gained 2.13 per cent since January 1.