Rupee unlikely to gain traction in coming year

BENGALURU: The Indian rupee will not regain ground lost against the dollar in the coming year, according to strategists polled by Reuters, who believe a recent rollback of a surcharge on foreign investments will have no impact on the currency.
After gaining about 2 per cent following a sweeping victory in the general election by the incumbent government late in May, the rupee has lost nearly 6 per cent since a July 5 budget when a surcharge on foreign investments was introduced.
That pushed international investors to turn net sellers after being net buyers until then from February.
Although those higher taxes were withdrawn last month, the move did not alleviate the rupee’s weakness and about 60 per cent of respondents did not expect it to have any impact for the remainder of the year.
The rupee fell to 72.40 per dollar on Tuesday, its weakest this year, still suffering from data last week that showed the economy grew at its slowest pace in over six years.
The August 29-September 4 Reuters poll of over 50 strategists predicted the currency INR= will trade around 72 per dollar over the coming year.
While the median forecast showed the rupee will not retest Tuesday’s low, the 12-month view was the most pessimistic since December.
“Although the measures by the government to rollback the surcharge is a step in the right direction, the damage is already done, as foreign investors continue to withdraw from the Indian equity market,” said Hugo Erken head of international economics at Rabobank, referring to its impact on the rupee. — Reuters