Rupee woes to persist as oil soars

Central Bank Governor Dr. Indrajit Coomaraswamy

Bloomberg: Standard Chartered PLC is predicting more pain for the rupee, which has been setting a string of record lows amid surging oil prices and a rout in emerging-market assets.

The rupee has dropped more than 10% against the dollar this year, approaching the record-breaking declines suffered by neighbour India’s rupee.

The nation’s current-account deficit, low foreign-currency reserves and rising oil prices are likely to weigh down on the currency, ASEAN and South-Asia Forex research Head Divya Devesh said by email. He is predicting the rupee to decline to 175 per dollar by year-end. The currency traded at a record low of 170.06 at 10.30 a.m. local time.

Efforts by the Central Bank and Government to prop up the sagging currency has so far yielded little. The Central Bank on Tuesday held back from raising rates to bolster the currency as it chose to support a nascent recovery in the South Asian island nation’s economy. 

Central Bank Governor Dr. Indrajit Coomaraswamy is expecting funds from a $ 1 billion syndicated loan from China within a week and is also looking to sell dollar bonds, Panda bonds and Samurai bonds.

The Government has taken measures to narrow the current account deficit including curbing of non-essential imports. Still the deficit is likely to remain close to 2.5% of Gross Domestic Product, Standard Chartered South Asia Economist Saurav Anand said in an email. The country will continue to be dependent on external borrowings to finance the deficit amid rising yields, Anand said.