Indian rupee remained worst-performing Asian currency in 2022
Indian rupee remained worst-performing Asian currency in 2022. As the dollar soared due to the US Federal Reserve’s tough monetary policy stance to contain inflation, the Indian rupee finished 2022 as the worst-performing Asian currency with a decrease of 11.3%, its largest annual decline since 2013.
The rupee fell from 74.33 at the end of 2021 to 82.72 at the end of the year, while the dollar index was on track to post its greatest annual increase since 2015.
A rise in oil prices brought on by the crisis between Russia and Ukraine also hurt the rupee and resulted in India’s current account deficit reaching an absolute record high in the third quarter of that year.
Moving into 2023, market participants believe the rupee would trade with an appreciation bias, finding relief from easing commodity prices and hopeful of foreign investors continuing to buy Indian equities.
“The Fed could keep rates higher for longer than anticipated and if the slowdown in developed economies turns into a prolonged recession, India’s exports could be hit severely, which are two key risks for the rupee,” said Raj Deepak Singh, head of derivatives research at ICICI Securities.
In the first quarter, most traders and analysts anticipate that the currency would fluctuate within a narrow 81.50–83.50 range.
According to economists, equity inflows will be a crucial indicator to watch for the rupee for both domestic and foreign investors.
But predicting the direction of share markets has grown difficult, they warned, due to a number of concerns going into 2023, including restrictive monetary policy circumstances, a possible recession in some nations, and an ongoing geopolitical strife.
“There’s going to be a period of softness in global equities… If we get a selloff in Indian shares, I’ll be less optimistic on the rupee,” said Christopher Wong, FX strategist at OCBC Bank.
The South Korean won and the Thai baht are predicted to increase the most next year, but the rupee could still lag Asian counterparts and not be a top choice in the emerging market complex, according to Wong.
