Page 34 - The Indian EYE 010623

BUSINESS EYE JANUARY 06, 2023 | The Indian Eye 34

YEARENDER 2022

After a weak and turbulent year, will the

Indian rupee rise strongly in 2023?

At the start of 2022, the overall forex reserves were at USD 633.61 billion, which is currently at USD 563.499
billion. Much of the decline can be attributed to RBI’s intervention and a rise in the cost of imported goods

OUR BUREAU

Mumbai
he Indian Rupee has been in
the news cycle for a consider-
Table part of 2022, not for good
reasons. Monetary policy tightening
by various central banks to contain
inflation, the war in Ukraine leading
to price rise for crude oil and subse-
quent realignment in the global ener-
gy supply chain, and strengthening of
the US dollar index kept the Indian
currency under pressure. In 2022, the
Rupee depreciated over 11 per cent
on a cumulative basis, data showed.
It breached the 83-mark against the
US dollar in mid-October, to hit an
all-time low.
It has, however, performed better
than most Asian peer currencies, in-
cluding the Chinese Renminbi, Indo-
nesian Rupiah, Philippine Peso, South
Korean Won, and Taiwanese Dollar
during the current financial year. For 2023, Rupee will be in a tight range of 80.0-83.5 as another breather may come from the decline in international crude oil prices (File photo)
The US Federal Reserve policy
rate is now at a target of 4.25-4.50 tightening monetary policies and fis- attributed to RBI’s intervention and in a tight range of 80.0-83.5. Anoth-
per cent, the highest level in 15 years, cal policies and the alarming situation a rise in the cost of imported goods. er breather may come from the de-
which was near zero in the early part from Covid in China. “The RBI intervention in forex cline in international crude oil prices,
of 2022. An increase in policy rates in However, everything is not spot market will curb any upside which currently is trading at about
the US and other advanced econo- gloom and doom for the Rupee fun- momentum in USD/INR rates. This USD 78-80 per barrel. It touched as
mies typically leads to a depreciation damentals as the US Dollar index has will help to stabilize exchange rates high as around USD 130 per barrel
of the emerging markets currency fallen from the peak of 114 to around around 83 - 87 in 2023,” said Su- earlier this year.
such as the Rupee. 105 currently. meet Bagaria, Executive Director at A depreciation in Rupee too has
“Indian Rupee has had a mixed According to VK Vijayakumar, Choice Broking, adding that it would its own share of advantages as it typi-
year in 2022, as far as relative perfor- Chief Investment Strategist at Geojit be interesting to see how the RBI cally raises exporters’ earnings. What
mance is concerned. During the first Financial Services, said: “The Dol- tackles the situation. is India doing to reduce the over-de-
three months it was an underperform- lar will stabilize and start weakening Going ahead, much of the Ru- pendence of the US Dollar and sub-
er due to higher oil prices. However, it when the (US) Fed pauses by Q2 of pee’s movement will also depend on sequent internationalization of the
came back strongly during the mid of 2023. RBI has done a good job in in- the monetary policy action by the US Rupee?
this year, due to fall in the energy pric- tervening in the forex market to stabi- Federal Reserve. The RBI had announced various
es and aggressive intervention from lize the rupee and manage the forex “If we look ahead to 2023, the measures recently to diversify and ex-
the RBI. But since October, we have reserves.” first half will still be unpredictable be- pand the sources of forex funding to
seen Rupee underperform its peers Typically, the RBI from time cause the USA’s terminal rate is still mitigate exchange rate volatility and
once again, but this time due to larger to time intervenes in the markets unknown, and the Russia-Ukraine dampen global spillovers.
than usual demand from oil import- through liquidity management, in- war has not yet ended. As a result, the Of them, the major one is that
ers,” said Shrikant Chouhan, Head cluding through the selling of dollars, first half of 2023 may see some addi- the RBI has put in place an additional
Equity Research at Kotak Securities. with a view to preventing a steep de- tional weakness, but the second half arrangement for invoicing, payment,
Chouhan added 2023 can be a preciation in the rupee. may be better for the rupee because and settlement of exports/imports in
year of two halves. At the start of 2022, the overall US interest rates may reach their Indian currency in mid-July, 2022. If
In explanation, he said “the seeds forex reserves were at USD 633.61 bil- peak,” said Santosh Meena, Head of the mechanism fructifies then it may
of a global economic slowdown could lion, which is currently at USD 563.499 Research at Swastika Investmart. go a long way in internationalizing
germinate” in the first half due to billion. Much of the decline can be For 2023, Meena sees Rupee the Indian currency rupee in the long

www.TheIndianEYE.com