Rupee May Fall To 73 Against Dollar By End-2017, Says Report

The rupee has shown remarkable strength against the US dollar at a time when the greenback is rising against other currencies. The recent decision by the Reserve Bank of India to keep interest rate on hold and signal a change in policy stance to 'neutral' from 'accommodative' gave a big boost to the Indian currency. The rupee is close to 67 level against the US dollar, which was near three-week highs against a basket of other global currencies. Will the rupee's outperformance continue? Some analysts say that the rupee faces downward pressure and could reverse its gains. The dollar-rupee pair is heading towards a level of 72-73 by December-end this year, says an Edelweiss Securities report.

According to the Edelweiss' annual currency outlook, the outperformance of the rupee is unlikely to continue. "While in the near-term, US weak dollar policy can create some downside pressure on dollar/rupee, we believe that fundamental pressure on dollar/rupee remains on upside and we see dollar/rupee heading towards level of 72-73," Edelweiss Securities said in a research note.

The report noted that the rupee will not be able to escape global dollar rally.

"While we remain optimistic on India's growth story and macro fundamentals; we believe that rupee over-valuation, rising commodity prices and growing protectionism amidst weakness in exports is likely to put pressure on rupee," the report said.

The Indian rupee has been one of the best performing emerging market currency in the last few years but the relative appreciation of the rupee is taking a toll through weak export. (Also read: For every rupee in government kitty, 19 paise to come from borrowing)

A Reuters poll of analysts also predicted that the rupee will reverse recent gains and sink to 69.50 a dollar in 12 months, which would be a record low for the currency.

Currency expert Jamal Mecklai also sees a downward bias for the rupee. "We could probably see a widening range 66.60- 68.20 and the range could widen further towards the weakening side."

(With agency inputs)