With global crude prices remaining elevated, the rupee is likely to be under pressure, and may touch the 76 levels against the US currency over the next three months, says a report.
The domestic currency has already crossed the 74 mark owing to continued strengthening of the dollar, lack of foreign flows and higher crude oil prices.
The unit lost over 15 percent since the beginning of the calendar year.
“Assuming global crude prices stay elevated (slightly above USD80/a barrel), we retain our bearish view on the rupee and see it plumbing to 76 over the next three months,” says a weekend report by the Swiss brokerage UBS.
From April to the first week of August 2018, the RBI has been intervening in the forex markets to contain volatility, which lead to a massive drop in the forex reserves that plunged by $25 billion to $393 billion last week.
This has led to two successive repo rate hikes to the tune of 50 basis points in total.
By keeping policy rates on hold in October, the RBI hinted that it will not use interest rate defence as a tool to manage currency weakness, the report said.