The crisis-hit rupee has fallen in value in recent days following the resignation of Urjit Patel as governor of the Reserve Bank of India, sending shockwaves through markets as investors struggled to digest the news. Mr Patel quit midway through his three-year term citing “personal reasons”. While he did not cite government tension as a reason for his departure, the RBI has been subject to months of reported conflict between the central bank and Indian government. Analysts have suggested his resignation was sparked in protest of “interference” by the government.
Before the successor for Mr Patel was announced, with Shaktikanta Das revealed to be taking the helm, the rupee had dropped by more than 2 percent.
Lukman Otunuga, Research Analyst at FXTM, said he is forecasting INR to “continue its tumble” against the US dollar for “a while yet”.
He told Gulf News: “The departure of Patel from the RBI has not only heightened investor uncertainty over India.
“More worryingly [it] will probably encourage the return of speculation of potential political influence over central bank policy in India.
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“With Patel’s sudden exit eroding investor confidence as India prepares for a general election next year, I would expect the rupee to continue its tumble on this shocking development for a while yet.”
The Indian rupee clawed back against the American greenback today, ending the trading session at 71.6850 after reaching 72.0188 yesterday.
October saw INR crash through the 74-barrier and reached an all-time low of 74.39 against the US dollar.
The drop was partly fuelled by soaring oil prices.
At its lowest point this year, the crippled currency nosedived by as much as 14 percent versus USD.
The rupee is forecast by Fitch Ratings to weaken to 75 by the end of 2019 on a widening current account deficit and tighter global financing conditions.
Fitch said: “The widening of the current account deficit amidst tighter global financing conditions should put downward pressure on the currency, and we forecast the INR to weaken to 75 against the dollar by end-2019.”
Higher interest rates and rising import prices are also expected from the depreciating rupee, according to Fitch.