The rupee fell past 65 to the dollar to a record low on Thursday, after Federal Reserve hinted that the U.S. was on course to begin tapering stimulus as early as next month and as foreign investors become sellers of Indian stocks.
The rupee fell as much as 2.2% to 65.5%, heading for a sixth straight session of declines, and is down by 16% so far this year, despite efforts by policymakers to prop it up.
The Indian rupee could crash to 70 against the U.S. dollar in a month or so, as per the report by Deutsche Bank. The ominous forecast comes at a time when the partially convertible rupee has breached 64 to the dollar to a record low.
“We continue to believe that fundamentally the rupee is undervalued and has overshot its equilibrium level substantially, but as numerous episodes of past currency crises have amply demonstrated, under a scenario of deep pessimism, currencies can overshoot substantially and remain so for a long time,” economists at Deutsche Bank wrote in the report.
“India, we fear, is entering such a zone”, the economist at Deutsche Bank further added.
Many analysts had forecast in July that the rupee is headed to 65-70 levels, so in a sense the Deutsche Bank's forecast does not ring alarm bells in the current scenario.
-Sourced
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