Research houses revise rupee estimates
With the rupee showing no sign of weakening, most research houses are now betting on a stronger rupee than what was estimated prior to March 2007.
By TNN |
MUMBAI: With the rupee showing no sign of weakening, most research houses are now betting on a stronger rupee than what was estimated prior to March 2007. To begin with, Goldman Sachs expects the rupee to trade around 42.40 levels per dollar as against the earlier forecast of 43 per dollar. StanChart, on the other hand, predicts that the rupee to end the calendar year 2007 at the 42.20 level against the greenback as against the earlier estimate of 44 per dollar. JP Morgan Chase had estimated that the rupee would trade at around 42 levels per dollar by December 2007.
The rupee was trading in the 44-44.25 range against the dollar between January and March 2007. However, since mid-March, the local currency has risen by nearly 8.5% to around 40.50 levels against the dollar.
Goldman Sachs, in its report on `India— where does the rupee go from here’, has estimated that the rupee to gradually weaken from the current level. The research firm has revised its 3-month, 6-month and 12-month dollar-rupee estimates to 41.3, 42.1 and 42.4 levels, respectively. Prior to March 2007, Goldman Sachs had forecast that the rupee would hover around 43 levels by end-December.
The movements in the rupee are largely determined by the inter-play between three factors — the current account deficit, the strength of capital inflows and the central bank’s intervention in the forex market. All these factors, to varying degrees, appear to suggest a weakening in the rupee.
Tushar Poddar, vice-president, Goldman Sachs, said, “At the start of the year, we had forecast the rupee to appreciate. However, the extent of appreciation since late March after unexpected rate hikes has been stronger than our forecast. Although we are estimating a depreciation in the rupee going forward, we feel that the local currency will be stronger than what we had estimated at the start of the year. Moving on similar lines, StanChart has also revised its rupee estimates. A report published by StanChart noted that the rupee has been on an appreciating path since just before the fiscal year-end, breaching one psychological level after another.
Sundeep Bhandari, managing director & regional head of global markets, South Asia at Standard Chartered Bank, said: “RBI appears to be tolerating a much greater degree of the rupee strength than we had previously expected. This is indicated by its overvaluation on a REER basis.”
HSBC, on its part, has revised its forecast for the wholesale price index (WPI) from 5.5% to 5% for 2008. The fall reflects the impact of the stronger rupee as well as weaker oil and non-oil commodity price inflation, pointed out HSBC’s Asia economist, Robert Prior-Wandesforde in a report.
StanChart believes that the rupee will correct in the second half of the fiscal as inflation eases and the market shifts focus to the country’s external deficit.
Standard Chartered has revised the 3-6-12-month forecasts for USD-INR to 41.80, 42.50 and 42.20 from 43.60, 44 and 43.80, respectively.
A report published by JP Morgan Chase states that with RBI staying away from intervening in the forex market, the rupee has appreciated significantly. Simultaneously, the report noted that capital inflows would continue to remain strong, with a sizable pipeline lined up for upcoming corporate equity issues. These could cause USD/INR to break below the 40-mark within the next month, if RBI does not intervene aggressively, observed the report.
“However, the expected combination of easing inflation, poor merchandise export performance, and more noise from exporter lobby groups about the USD/INR’s recent appreciation will likely revive the RBI’s intervention, pushing USD/INR to 42 by the year end,” feels Rajeev Malik, senior economist at JP Morgan.
The rupee was trading in the 44-44.25 range against the dollar between January and March 2007. However, since mid-March, the local currency has risen by nearly 8.5% to around 40.50 levels against the dollar.
Goldman Sachs, in its report on `India— where does the rupee go from here’, has estimated that the rupee to gradually weaken from the current level. The research firm has revised its 3-month, 6-month and 12-month dollar-rupee estimates to 41.3, 42.1 and 42.4 levels, respectively. Prior to March 2007, Goldman Sachs had forecast that the rupee would hover around 43 levels by end-December.
The movements in the rupee are largely determined by the inter-play between three factors — the current account deficit, the strength of capital inflows and the central bank’s intervention in the forex market. All these factors, to varying degrees, appear to suggest a weakening in the rupee.
Tushar Poddar, vice-president, Goldman Sachs, said, “At the start of the year, we had forecast the rupee to appreciate. However, the extent of appreciation since late March after unexpected rate hikes has been stronger than our forecast. Although we are estimating a depreciation in the rupee going forward, we feel that the local currency will be stronger than what we had estimated at the start of the year. Moving on similar lines, StanChart has also revised its rupee estimates. A report published by StanChart noted that the rupee has been on an appreciating path since just before the fiscal year-end, breaching one psychological level after another.
Sundeep Bhandari, managing director & regional head of global markets, South Asia at Standard Chartered Bank, said: “RBI appears to be tolerating a much greater degree of the rupee strength than we had previously expected. This is indicated by its overvaluation on a REER basis.”
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HSBC, on its part, has revised its forecast for the wholesale price index (WPI) from 5.5% to 5% for 2008. The fall reflects the impact of the stronger rupee as well as weaker oil and non-oil commodity price inflation, pointed out HSBC’s Asia economist, Robert Prior-Wandesforde in a report.
StanChart believes that the rupee will correct in the second half of the fiscal as inflation eases and the market shifts focus to the country’s external deficit.
Standard Chartered has revised the 3-6-12-month forecasts for USD-INR to 41.80, 42.50 and 42.20 from 43.60, 44 and 43.80, respectively.
A report published by JP Morgan Chase states that with RBI staying away from intervening in the forex market, the rupee has appreciated significantly. Simultaneously, the report noted that capital inflows would continue to remain strong, with a sizable pipeline lined up for upcoming corporate equity issues. These could cause USD/INR to break below the 40-mark within the next month, if RBI does not intervene aggressively, observed the report.
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“However, the expected combination of easing inflation, poor merchandise export performance, and more noise from exporter lobby groups about the USD/INR’s recent appreciation will likely revive the RBI’s intervention, pushing USD/INR to 42 by the year end,” feels Rajeev Malik, senior economist at JP Morgan.
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