From The Economic Times · Rozebud Gonsalves · · 1m
Why rupee weakens despite narrower current account deficit
Rupee expected to weaken further as global conditions tighten.
In brief
Rupee expected to weaken further as global conditions tighten. The Indian rupee is projected to depreciate further despite a narrower current account deficit due to global financial pressures and oil prices. Originally reported by The Economic Times.
Rupee depreciates 5% this year
The Indian rupee has depreciated 5% this calendar year despite narrower current account deficit.
Global financial conditions tighten
Tighter global financial conditions and persistent foreign portfolio outflows pressure the rupee.
RBI intervention insufficient
Sustained Reserve Bank of India intervention cannot bridge the gap with external pressures.
Current account deficit narrows
Current account deficit contracted to 0.5% of GDP from 2.5% three years ago.
Indonesian rupiah weakest in Asia
Indonesian rupiah fell 7.3% while South Korean won gained 8.5% this year.
Oil prices impact rupee
Higher oil import costs from Brent crude near $105 per barrel weaken the rupee.
RBI measures to curb outflows
RBI introduced special window for oil companies and tightened forex derivatives rules.
The short version
The Indian rupee is projected to depreciate further despite a narrower current account deficit due to global financial pressures and oil prices.
