According to economists at TD Securities, the Indian rupee is set to struggle in the weeks ahead. Position for renewed depreciation amid widening trade and current account deficits.

USD/INR to reach 75.4 by end Q1

“It's hard to see the trade and current account deficits narrow much, especially as oil prices are likely to move higher, while domestic demand continues to strengthen.”

Given that the Fed is primed to hike rates by mid-year and is accelerating the pace of tapering, India may struggle to see a rebound in portfolio inflows.”

“The worsening in India's broad basic balance position implies less support for INR and more susceptibility to bouts of risk aversion.”

“The rupee is looking stretched from a valuation perspective. As such, a weaker currency may help exporters, something that the RBI would likely want to encourage.”

“We forecast USD/INR to reach 75.4 by end Q1, with INR risks skewed to the downside.”