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Aug 01, 2012, 03.56 PM IST
Standard Chartered says the RBI's pause in interest rates, higher inflation, and lower GDP growth projection pose a negative backdrop for the rupee, though it does not expect the currency to fall below its recent record low in the near-term.
The bank expects the rupee's record low of 57.33 hit on June 22 to hold, but also does not expect a break above the recent high of 54.17 on July 4, according to a note dated on Tuesday. "In the absence of decisive measures by the government and the central bank to deal with structural inflation, we do not anticipate any substantive recovery in USD-INR until 2013, even if other Asia ex-Japan (AXJ) currencies rally amid improved global economic dynamics later on," it said. StanChart sticks to its forecast for no RBI rate cuts in the rest of 2012. Adds RBI unlikely to do OMOs as liquidity deficit expected to remain within the central bank's comfort zone. The SLR cut should curb demand for government bonds from banks, while the lack of OMO bond purchases and continued debt sales could push benchmark 10-year yields to 8.50% by end-September, StanChart says.
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