As only a week or so is left for the year 2020 to end, the Indian rupee is on course to be the worst performing Asian currency. Also, it marks the third yearly decline of the Indian currency against the US dollar.
Rupee Tumbles Over 3.5 Percent In CY 2020 On RBI's Dollar Buying And Weak Economic Activity
On a year to date basis, the home currency has tumbled by more than 3.5% to 73.84 per US dollar. The analysts owe this weakness in the Indian rupee to the central bank's dollar buying spree as well as sluggish economic activity due to the Covid 19 outbreak.
In the current year, as per NSDL data, India received over $50 billion via the FDI and FPI modes. Foreign investors bought equities to the tune of $17.7 billion and sold debt worth $14.5 with net inflows at $7.7 billion. Nonetheless, as per a recent HDFC Securities report, the rupee did not showed resilience despite huge foreign flows as the central bank absorbed all dollar inflows via regular interventions for restricting the currency from scaling higher to support exports.
Outlook 2021 for Indian rupee
The brokerage firm for the start of 2021 expects the Indian rupee to trade lower owing to weak dollar momentum as well as US Federal Reserve's loose monetary policy. Nonetheless, dollar buying by RBI would limit the downside in USD-INR pair and the pair is likely to trade in a broad range between 71 and 76 in 2021.
Performance of rupee against other trading currencies
As against Euro, rupee depreciated by over 10%, which underscores Euro's strength against the US dollar. As per the brokerage Euro was supported on the back of better than expected economic growth, ultra-loose monetary policy, possibly reserve rebalancing flows and risk-on sentiment.
The sterling pound on the other hand moved higher by a percentage against the dollar, while against the rupee it surged 4.2 percent on a year to date basis. While the Japanese Yen jumped over 4 percent in comparison to the dollar even as the country confronted trade deficits.