Rupee may fall to 83.50 in October amid strong dollar, elevated crude prices and faltering exports

By Anil Kumar Bhansali

USDINR opened with a gap up at 82.20 in the previous session after Thursday’s close at 81.90 and the market saw only dollar buying by corporates and banks as pressure on rupee continued on Friday as well. With all Asian currencies falling – CNH from 7.02 to 7.12 and KRW from near 1400 to 1412 – and Brent oil nearing $95 per barrel, it was a rupee-bashing day again. The OPEC+ countries decided to curtail production of oil by 2 million barrels which kept out on the boil. During the curtailed week due to a holiday on Wednesday, the rupee made a high of 81.36 on 4 October, and made a low of 82.42 on Friday registering a record closing.

With the fall rupee has depreciated by 10.50 per cent against the dollar during the calendar year, but was still better off than other currencies, most of which have fallen by 12-20 per cent. The 10-year yields of Indian bond rose to 7.45 per cent as market expectations of India’s inclusion in the world bond index were dampened due to the country postponing its decision by a year. With dollar interest rates rising, our exports faltering, borrowings getting due outflow increasing, and oil prices remaining higher, we may continue to see the fall in rupee with a range of 81.50 to 83.50 in the month of October.

The US non-farm payroll data is to be released on October 7 as the private payroll growth on Wednesday came strong and accordingly the NFPR is expected to show an increase of 265k against 308k last month. RBI seems to have slowed down on its intervention in USDINR from the sell side after its reserves have fallen by $100 billion of which 67 per cent has been due to valuation of other currencies and its US dollar holdings. The ammunition may have dented to some extent and therefore it has allowed the rupee to weaken by about 3 per cent since the start of September 2022.

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Exporters should hold to their dollar receivables and not book forwards keeping a stop loss of 81.75. Importers should keep buying all dips and any major dips to hedge their payables.

(Anil Kumar Bhansali is Head of Treasury, Finrex Treasury Advisors. The views expressed are the author’s own. Please consult your financial advisor before investing).