Rupee Could Touch 85 Mark Against US Dollar, Likely To Remain Under Pressure In 2023: Economists

Various economists at the SBI Banking & Economic Conclave predicted challenging times for the rupee to last in 2023.

Rupee Could Touch 85 Mark Against US Dollar, Likely To Remain Under Pressure In 2023: Economists
The most optimistic projection pegs the exchange rate at 80–82 against the dollar.

THE RUPEE is likely to remain under pressure next year and could even touch the 85 mark against the US dollar, according to economists.

Since Russia invaded Ukraine in late February, a sharp surge in crude oil prices accompanied by supply chain disruptions was seen, which put the rupee under unprecedented pressure. The domestic currency had touched an all-time low of 83 against the dollar on October 19.

During a panel discussion at the SBI Banking & Economic Conclave here on Thursday, various economists said the rupee will continue to remain under pressure given the widening current account deficit (when the total value of goods and services a country imports exceeds the total value of goods and services it exports), which is seen close to 4 per cent of the GDP this fiscal.

There is also pressure on foreign exchange earnings as exports began to fall since last month, they said, expecting the rupee to trade between a high of 82 and a low of 85 to the dollar in 2023.

Deepak Mishra, Director & Chief Executive at the economic think tank ICRIER (Indian Council for Research on International Economic Relations), and Sajjid Chinoy, Chief Economist at JP Morgan India, have forecast that the rupee may hit a low of 85 and a high of 83 to the dollar next year.

Soumya Kanti Ghosh, the Group Chief Economic Adviser at the State Bank of India (SBI), was the most optimistic of the lot as he projected the rupee at 80–82 against the dollar  — roughly the current level. Further, he said the rupee may rise to 81 in the first half of 2023 and fall to 82 in the second part.

Rajeswari Sengupta, an associate professor at IGIDR (Indira Gandhi Institute of Development Research), said the rupee is expected to trade at 84 to a dollar and might even fall to 85 in the second half of the next year, but only if the Reserve Bank of India (RBI) stops intervening in the money market.

Ashima Goyal, an external member of RBI's rate-setting Monetary Policy Committee, said the rupee would begin to fare better in the second half of next year.

Chinoy said that the dollar volatility index or the DXY is at a two-decadal high as the US Federal Reserve is aggressively hiking rates due to high inflation.

Similarly, the European Central Bank (the central bank of 19 countries that have adopted the Euro) has been on a rate hiking cycle, which it has not done in the past at all following the gas shortage that started since Russia’s invasion of Ukraine.

On Thursday, the rupee gained 23 paise to close at 81.70 against the dollar. Meanwhile, the average exchange rate vis-à-vis the dollar for the year has been 78.19 so far with the best rate noted on January 12, when the rupee was poised at 73.81.

With inputs from PTI.

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