The Indian rupee has never traded at three digits to the dollar. Three big global funds now say that could change.
Aberdeen, MetLife, and Gamma Asset Management are all running scenarios where the rupee breaks 100. The rupee closed near 97 on Wednesday.
The Reserve Bank of India stepped in to slow the slide.
The fall has been fast. The rupee blew past 95, then 96, in just weeks.
It is down more than 7% on the year. That is more than double the pace the Reserve Bank calls normal.
A break of 100 would mark a new low. It would also test how far the Reserve Bank is willing to go to defend the rupee.
India brings in nearly all of its oil from abroad. So when Brent crude hit $110 a barrel, India's import bill jumped.
Demand for dollars jumped with it.
Rajeev De Mello at Gamma Asset Management said the 100 line is what global funds are watching most. The next leg up in oil could be enough to break it.
The Reserve Bank says it does not target a level, just smooths sharp moves.
The central bank has been quietly selling dollars to slow the slide. Bankers estimate the daily sales at roughly $1 billion.
That spending is one reason the rupee did not blow past 97 on Wednesday.
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Even as the bank spends, global funds have started pulling money out. They have taken a record $23 billion out of Indian stocks this year.
They have barely bought any Indian bonds, just $1.3 billion. Currency losses can eat a stock gain alive.
If your fund earns 5% on Indian shares but the rupee falls 7%, the dollar return is in the red.
That math is why Wall Street is rewriting its rupee forecasts in real time. DBS now sees the rupee between 95 and 100, while Citi expects 98 in the short term.
Other banks are moving too. HSBC cut its target to 95.5 from 93.5, ANZ now sees 97.5 by year-end from 93, and Kotak Mahindra Bank's range runs 93 to 99.
Not everyone is bearish. Amundi says Asian currencies have grown cheap, which could set up a bounce later in the year.
A weaker rupee is not all bad. It helps Indian firms that sell goods abroad, because their products get cheaper in dollar terms.
That export boost only goes so far. The Reserve Bank of India still says it does not target a level.
But a fast slide toward 100 would likely force harder action.
Investors should track three things:
That last point is the line investors watch every morning the Mumbai market opens.
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