The Indian rupee ended the year as the worst-performing currency in Asia after experiencing its steepest decline since 2013. Read to know more.
Indian rupee ends 2022 as worst-performing in Asia
The Indian rupee is finishing the year at an exchange of 82.72 against the US dollar. It is down from 74.33 at the end of last year. However, the US dollar index against it was the highest since 2015. The currency experienced a fall of 11.3 percent, the biggest yearly decline since 2013. This year, the south Asian currency was a victim of skyrocketing oil prices sparked by the conflict between Russia and Ukraine. It pushed the currency account debt to a record high in September.
Stepping into 2023, market experts believe the rupee with trade with an appreciation bias. They are hoping the relief from easing prices of the commodities will help. Additionally, they are also hopeful that foreign investors continue buying Indian equities. “The Fed could keep rates higher for longer than anticipated and if the slowdown in developed economies turns into a prolonged recession, India’s exports could be hit severely, which are two key risks for the rupee,” stated Raj Deepak Singh. Singh is the head of derivates research for ICICI Securities.
What’s in store in the new year?
Most analysts and traders are expecting the Indian rupee to move in the 81.50-83.50 range during the first quarter of 2023. “Equity inflows would be a key metric to watch for the rupee for foreign investors as well,” stated analysts. However, predicting the direction of share markets is difficult due to the prevailing uncertainties. Uncertainties such as a likely recession in some economies, tight monetary policy conditions, and geopolitical conflicts are lurking in the background.
“There’s going to be a period of softness in global equities… If we get a selloff in Indian shares, I’ll be less optimistic on the rupee,” stated Christopher Wong. Wong is an FX strategist with the Oversea-Chinese Banking Corporation (OCBC). “Even if the rupee appreciates, it could still underperform Asian peers and would not be a top pick in the emerging market complex,” he added. Wong is expecting Thailand’s baht and South Korea’s win to gain next year.
