INR remains one the riskiest currencies, says CLSA

Even though the Indian rupee hit all time low at 52.73 against the dollar in November, 2011; the local unit is not expected to show any sign of stability in the current year. This is evident when the global brokerage firm CLSA says, Indian rupee remains one of the riskiest currencies and predicts a rupee level at 55/USD by the end of 2012.
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Apr 03, 2012, 09.10 PM | Source: Moneycontrol.com

INR remains one the riskiest currencies, says CLSA

Even though the Indian rupee hit all time low at 52.73 against the dollar in November, 2011; the local unit is not expected to show any sign of stability in the current year. This is evident when the global brokerage firm CLSA says, Indian rupee remains one of the riskiest currencies and predicts a rupee level at 55/USD by the end of 2012.

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INR remains one the riskiest currencies, says CLSA

Even though the Indian rupee hit all time low at 52.73 against the dollar in November, 2011; the local unit is not expected to show any sign of stability in the current year. This is evident when the global brokerage firm CLSA says, Indian rupee remains one of the riskiest currencies and predicts a rupee level at 55/USD by the end of 2012.

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INR remains one the riskiest currencies, says CLSA

Moneycontrol Bureau

Even though the Indian rupee hit all time low at 52.73 against the dollar in November, 2011; the local unit is not expected to show any sign of stability in the current year. This is evident when the global brokerage firm CLSA says, Indian rupee remains one of the riskiest currencies and predicts a rupee level at 55/USD by the end of 2012.

This is how CLSA justifies its stance:

“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.  Rupee’s recovery in January was due partly to RBI’s aggressive currency intervention, although global risk-on, RBI’s anti-speculative measures and deregulation of NRI deposit rates also helped.”

Interestingly, the Indian currency has been weakening against the greenback since early
February, 2012. This is happening despite a surge in portfolio inflows into India (1Q12: around USD13.5bn). Typically, the demand for rupee scale up when overseas investors buy Indian shares resulting in rupee appreciation.

“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,” said the CLSA report.

Two key factors for rupee outlook:

Impact on international crude oil prices
Capital inflows into India.

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INR remains one the riskiest currencies, says CLSA

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