This month saw the rupee breach the 74-mark for the first time ever against the US dollar as it falters under pressure from soaring oil prices and higher interest rates.
Financial analysts are now wondering how low the rupee will continue to sink, with Marc Faber, veteran investor and publisher of the Gloom Boom & Doom Report newsletter, admitting that “India’s fiscal position is not particularly good”.
As of just before 12:30 BST, the Indian rupee is trading at 73.61, according to data from Bloomberg.
When asked if the rupee could plummet to levels of 100 against the US dollar, Mr Faber said this would require a depreciation of 5 to 10 percent per year.
But he stressed that this process would need to rumble on for “the next few years” in order to reach triple figures against the greenback.
Mr Faber told The Economic Times: “Well the timeframe is I would look for is a depreciation of 5 to 10 percent per year for the next few years.”
Mr Faber also called on India to raise interest rates “meaningfully” to give the rupee some breathing space.
He said: “Either India has to increase interest rates meaningfully, which would mean that the economy would be hurt, or they obviously will have a weaker currency over time – and nobody can deny the fact that over the last 10, 20, 30 years, the rupee has been a weak currency.”
The Reserve Bank of India went against predictions from financial analysts as it held interest rates at the start of October.
The RBI's monetary policy committee (MPC) left the repo rate unchanged at 6.50 percent, with five out of six panel members voting to hold the rate
In its policy statement, the bank said: “Global headwinds in the form of escalating trade tensions, volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation outlook.”
Defending the decision, the bank said it was acting "to further strengthen domestic macroeconomic fundamentals”.
- Source, Express UK
