Rupee to appreciate to 82 per dollar in CY24, predicts CareEdge Ratings

The Indian Rupee is expected to appreciate to around 82 against the Dollar in the calendar year 2024 on the back of a softening dollar, robust Foreign Portfolio Investment (FPI) inflows, and a comfortable current account deficit, according to a report by CareEdge Ratings. However, the report also said that interventions by the Reserve Bank of India (RBI) to build forex reserves might act as a counterforce to curb the appreciation of the Rupee.

The rupee settled at Rs 83.12 per Dollar on Wednesday. It moved in a narrow range of Rs 83.07 per Dollar to Rs 83.17 a Dollar in the current week as the RBI and oil companies continue to absorb inflows.

The report suggested that the local currency might trade between 82.75-83.25 in Q1, 82.5-83 in Q2, 82.25-82.75 in Q3, and stabilising between 82-82.5 levels in Q4 CY24. Concurrently, the Dollar Index is anticipated to remain within the range of 98-101 levels by the end of Q4 CY24.

The report also sheds light on the monetary policy expectations, foreseeing a 50 basis points (bps) reduction in the repo rate by the RBI in CY24. This reduction is anticipated to occur in two installments, with 25 bps each in Q3 and Q4. Furthermore, CareEdge Ratings suggests that the Federal Reserve is likely to cut rates by a more substantial 100-125 bps in CY24. This dual reduction in interest rates is expected to soften the dollar, providing a conducive environment for other currencies, including the INR, to appreciate.

The report expects crude oil prices to trade within the range of $70-85 per barrel in 2024. This projection is attributed to a global demand slowdown, which is expected to support India's current account deficit. However, the report warns against potential disruptions, such as an escalation of the Red Sea crisis or heightened global macroeconomic uncertainties, which could impact the predicted stability.