MUMBAI: The Indian rupee continued to extend its winning streak and hit fresh 5-1/2 month high today by breaking below 52 to a dollar. The rupee gained in the past one month on the back of government reforms and also due to improvement in the current account deficit, which has narrowed down from record highs.
The Cabinet meeting today is expected to see more reform measures being announced. The Cabinet could approve bills that would raise FDI in insurance and pension sectors.
The rupee has also strengthened from dollar inflows in other assets like equities. Also, dollar sales are now coming in from exporters and banks on expectations of further appreciation in the unit. The sharp decline in the crude price is also adding to the rupee strength.
The rupee, the best performing currency in Asia, is up 6.5 per cent in the past one month and has gained 4.5 per cent in the past three months. Analysts are still bullish on the rupee with Overseas Chinese Banking Corporation predicting the currency to gain 5 per cent to 49.70. There also is a Credit Suisse report putting the Indian unit to 50 vs USD in 3 - 4 months.
There are notes of caution coming in as well on the overbought rupee. The Indian economic reforms, while are being approved in truckloads, still have to see the implementation. As of now, it's only the sentiment which is at work. The global economic growth is also shaky and that makes the recovery vulnerable.
Nomura feels that the rupee would gain only in a status quo kind of environment, which is unlikely. So any further bullish move in the rupee now beyond 52 should be seen with a caution.
(source: economictimes.indiatimes.com)
No comments:
Post a Comment