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Rupee woes
INR remains one of the riskiest currencies. India’s large and widening
current account (CA) deficit and its dependence on volatile capital inflows
make it vulnerable to becoming a casualty of swings in global risk appetite
and crude oil prices. INR’s recovery in January was due partly to RBI’s
aggressive currency intervention, although global risk-on, RBI’s antispeculative
measures and deregulation of NRI deposit rates also
helped. However, INR has been weakening against USD since early
February, despite a surge in portfolio inflows into India (1Q12: around
USD13.5bn). Global risk-on will likely boost volatile capital inflows unless
domestic factors, such politics and policy coordination, are turn-offs. But
capital inflows may not be adequate to eliminate concerns about smooth
financing of the CA deficit. On our forecast, the CA deficit of 3.9% of GDP
in FY13 is beyond the RBI’s comfort level. This, along with our
expectations of a stronger dollar, sets the stage for INR to weaken. We
maintain our end-2012 forecast of INR55:USD.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Rupee woes
INR remains one of the riskiest currencies. India’s large and widening
current account (CA) deficit and its dependence on volatile capital inflows
make it vulnerable to becoming a casualty of swings in global risk appetite
and crude oil prices. INR’s recovery in January was due partly to RBI’s
aggressive currency intervention, although global risk-on, RBI’s antispeculative
measures and deregulation of NRI deposit rates also
helped. However, INR has been weakening against USD since early
February, despite a surge in portfolio inflows into India (1Q12: around
USD13.5bn). Global risk-on will likely boost volatile capital inflows unless
domestic factors, such politics and policy coordination, are turn-offs. But
capital inflows may not be adequate to eliminate concerns about smooth
financing of the CA deficit. On our forecast, the CA deficit of 3.9% of GDP
in FY13 is beyond the RBI’s comfort level. This, along with our
expectations of a stronger dollar, sets the stage for INR to weaken. We
maintain our end-2012 forecast of INR55:USD.
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