During the last 5 years INR has been in a range of 44-46 except for a few patches of 38 in 2008 and above 50 during beginning of 2009. Currently in October it is back again into the familiar territory of 46.
Outlook for INR vs USD looks bullish and would remain in the territory of 44-46 upto March 2010. This view is driven by the fact that India has a strong forex reserve of USD 280.3 billion (for the week ended 2nd October, 2009) and higher dollar inflows from overseas. Further IIP for August showed robust growth of 10.4% and a healthy stock market which has crossed 17,000 points also paints a rosy picture for the currency market. The above factors will weigh down the import demand for Dollars and Dollar recovery overseas due to the talk of end in economic recession in the US. Though there is talk about increase in interest rates in the US, it may not see the light of the day soon, and hence there is a strong case for rupee appreciation or staying put at levels of 44-46 upto March 2010.
Forward Premium is at 0.13% for 1 month (quoting at 46.70) and 1.48% for 6 months (quoting at 47.33) which reflects the sentiment that rupee will be in a short range and there are strong indications of the same appreciating.
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