Rupee rebound temporary? ING lowers year-end forecast; says these 2 factors weigh

The Equicom

ING Bank NV has lowered its year-end rupee forecast just as the currency is staging a rebound. Rising oil prices and political uncertainty ahead of state elections will see Asia’s worst-performing currency resume losses, according to Prakash Sakpal, an economist at ING in Singapore, whose estimate of 76.50 per dollar is the most bearish in a Bloomberg survey. The forecast signals a drop of more than 4 percent over the rupee’s close Friday and compares with a survey median of 72.88.

The rupee is “is highly correlated with oil prices, which are definitely moving higher, and that’s going to make the current-account situation more difficult,” Sakpal said in an interview. “Investors will also start adding the political-risk premium to the currency.”

Prime Minister Narendra Modi’s government is gearing up for a big test, with elections in five states over the next two months before the national vote in 2019. Some opinion polls are already predicting a win for the main opposition Congress party in the key state of Rajasthan, and a close contest in Madhya Pradesh.

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