Apr 25, 2012, 01.25 PM IST | Source: Reuters

Rupee to be under pressure on S&P's revised outlook: Expert

Ratings agency Standard & Poor's on Wednesday cut India's outlook to negative from stable, citing slow progress on its fiscal situation, as well as deteriorating economic indicators.

Rupee to be under pressure on S&P's revised outlook: Expert

Ratings agency Standard & Poor's on Wednesday cut India's outlook to negative from stable, citing slow progress on its fiscal situation, as well as deteriorating economic indicators.

There is a one in three chance of a downgrade to India's credit rating if external conditions continue to deteriorate, the ratings agency said in a statement.

Suresh Kumar Ramanathan, Regional Rates And Foreign Exchange Strategist, Cimb Investment Bank, Kuala Lumpur says, "With the outlook negative, this is likely to put a strain on the currency and is on track to meet our Q2 target of 54.00 (to the dollar).

"The OIS curve is tighter as rates inch higher particularly in the front end. This is made worse as liquidity is tight, with repo borrowings rising to Rs 1.18 lakh crore above the comfort zone of RBI.

"The curve is likely to steepen and we see the front end continuing to see much of the action as market prices in the risk premium of ratings outlook into negative via paying on the rates," he adds.

 

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