Rupee likely to remain under pressure in 2023, say economists

The rupee is likely to remain under pressure next year and could even touch 85 against the US dollar, according to economists.Since Russia invaded Ukraine in late February and the resultant spike in crude prices and supply chain disruptions, the rupee has been under tremendous pressure. The domestic currency had touched an all-time low of 83 against the dollar on October 19.On Thursday, rupee gained 23 paise to close at 81.70 against the dollar.During a panel discussion at the SBI Banking & Economic Conclave here on Thursday, various economists said the rupee will continue to be under pressure given the widening current account deficit which is seen close to 4 per cent of the GDP this fiscal.There is also pressure on forex earning as exports began to fall since last month, they said and expect the rupee to trade between a high of 82 and a low of 85 to the dollar in 2023.Deepak Mishra, the chief executive at the economic think-tank ICRIER, and Sajjid Chinoy, the chief economist at JP Morgan India, have forecast the rupee to hit a low of 85 and a high of 83 to the dollar next year.Soumya Kanti Ghosh, the group chief economic adviser at the State Bank of India (SBI), has the best projection for the rupee at 80-82 against the dollar, which is more or less the current level.Further, he said the rupee may rise to 81 in the first half of 2023 and fall to 82 in the second part.Rajeswari Sengupta, an associate professor at IGIDR, said the rupee is expected to trade at 84 to a dollar and even plumb to 85 in the second half of the next year, only if the Reserve Bank of India (RBI) stops intervening in the money market.Ashima Goyal, an external member in RBI’s rate-setting Monetary Policy Committee, said the rupee will begin to fare better in the second half of next year.According to Chinoy, the dollar volatility index or the DXY is at a two-decadal high as the US Federal Reserve is aggressively hiking rates due to high inflation in the American economy.Similarly, the European Central Bank has been on a rate hiking cycle which it has not done in the past at all following the gas shortage after Russia invaded Ukraine