Gloom deepens for rupee, Asia’s worst-performing currency

Nomura and S&P Global Market Intelligence forecast the rupee could slide to 92 against the dollar by the end of March, from about 89.6 currently, unless there is a breakthrough in trade talks with Washington.

India, the world’s fifth-largest economy, is facing elevated trade uncertainty as negotiations with the US continue to drag on. Any meaningful strengthening in the rupee is likely to depend on clarity over a bilateral trade agreement, economists say.

“We believe the rupee to be undervalued currently, with correction anticipated after there is more clarity on the US-India trade agreement,” said Hanna Luchnikava-Schorsch, head of Asia-Pacific economics at S&P Global Market Intelligence. 

India remains among the highest-tariffed countries globally, with average duties of around 50%, exceeding even those imposed on China. The steep levies have weighed on trade flows as talks between New Delhi and Washington stall.

After higher tariffs came into force in August, India’s exports to the US fell nearly 12% in September and 8.5% in October. Exports rebounded sharply in November, however, rising 22.6%, offering some relief to exporters.

Nomura’s chief economist for India and Asia ex-Japan, Sonal Varma, said the main risk is that India could lose momentum from global supply chain shifts. 

Firms focused on the US market may look elsewhere if high tariffs persist, she warned.

The rupee’s slide gathered pace earlier this month when it breached the psychologically important 90-per-dollar level. The currency began the year at 85.64 to the dollar and crossed the 91 mark in fewer than 15 trading sessions.

Foreign investors have remained largely bearish on India, with net outflows of more than $10 billion across asset classes this year, according to NSDL data. While India’s central bank has reiterated that market forces should determine the exchange rate, it reportedly intervened aggressively this week to curb the rupee’s fall.