The dovish policy stance of the Reserve Bank of India (RBI) has lowered the currency’s yield appeal, said RBC's Sue Trinh.
The Indian rupee could suffer more pain and weaken to 80 against the US dollar by September, according to the Royal Bank of Canada (RBC).
The dovish policy stance of the Reserve Bank of India (RBI) has lowered the currency’s yield appeal, RBC's Sue Trinh, who is head of Asia forex strategy at RBC in Hong Kong, told news agency Bloomberg.
This prediction, a slide of over 11 percent from current levels, is more bearish than the 71.25 median forecast in a Bloomberg Survey.
The central bank had in February shifted its policy stance to "neutral" from "calibrated tightening", cutting interest rates by 25 basis points.
“The combination of consumer inflation undershoots and dovish policy bias of Governor Das suggests big rate cuts could be around the corner,” said Trinh.
The hurdle of funding the widening budget deficit will also put pressure on the rupee.
The rupee is already the worst performing currency this year in Asia, excluding Japan, according to the Bloomberg report.
The rupee opened at 70.74 against the dollar on March 1, marginally lower than the previous close of 70.72.
The rupee had rallied this week due to tensions between India and Pakistan.
"It is not specific to India, but everywhere you look there are potential flashpoints that can flare up at the drop of a dime in the context of slowing global growth, massive levels of debt and increasingly desperate governments," Trinh said.This risk, according to Trinh, is being underpriced by markets.