RBI may buy back dollars to maintain rupee at 58: BAML

The RBI may buy back dollars to maintain the value of the currency at 58 to the US dollar, according to a report by Bank of America Merrill Lynch (BAML) . Recent developments in Iraq have indicated that sentiments in foreign currency markets are vulnerable to geopolitical risks.

The American bank advises its clients to watch out for six risks ahead. The most important is the risk arising from troubles in Iraq. There could be some volatility in crude oil prices, in turn, impacting India’s crude import bill.

The next is the issue of gold import curbs. A 2% cut in gold import duty is expected in the forthcoming Budget. Investors are also keen to know whether the government would relax FII limits for bonds. Another keenly watched development is whether tapering will strengthen the US dollar.

BAML strategists expect $1.30 to the euro by December. Besides, there is also a worry on whether trade seasonality would favour rupee again. This may not happen until January. Finally, will bank/corporate forex repayments put pressure on the level of the rupee? BAML expects a rollover.