Rupee Slides Towards Year's Low On Widening Trade Deficit, Rising Commodity Prices

Standard Chartered and RBL Bank forecast the currency to depreciate to 76 per dollar by year-end, while their peers at Deutsche Bank AG have a slightly less pessimistic projection of 75

After months of wild volatility in the rupee, India's widening trade deficit and elevated commodity prices are bearing down on the currency, reinforcing a recent downward bias and pushing it toward a new low for the year. That's the view of traders who've seen the rupee whipsaw from being Asia's best performer in the first quarter to its worst in April when another wave of Covid-19 infections took hold. This volatility and the prospect of tapering by the Federal Reserve have also reduced the attractiveness of India's currency for carry trades, adding to its headwinds. "We expect oil and broader commodity complex prices to remain elevated in the short term, which will weigh on India's trade balance," said Standard Chartered Plc's Parul Mittal Sinha. "We maintain a bearish view on the rupee," said Sinha, who heads the bank's India financial markets and macro trading for South Asia. Standard Chartered and RBL Bank forecast the currency to depreciate to 76 per dollar by year-end, while their peers at Deutsche Bank AG have a slightly less pessimistic projection of 75.