Monday, March 10, 2014

Five reasons why rupee may not appreciate much Read more at:

NEW DELHI: The Indian rupee, which has over the past few days has strengthened substantially on the back of record foreign investment in equities and a drastic dip in the current account deficit, may not appreciate much more. 

The rupee has been largely resilient, following its drastic depreciation last year. A slew of measures by the Reserve bank of India and steps to contain current account deficit by the government have helped check the slide. 

However global and domestic may act as deterrents in the currency's bid to appreciate substantially from current levels. We take a look at five factors that may play the part pooper in rupee's rally: 

Growth concerns: India's economic growth has been dwindling below the 5% mark and many economists are of the opinion that the economy will undergo a painful phase of slow economic recovery. This may weigh on the rupee's chances of rallying. 

Sugandha Sachdeva, AVP & Incharge- Metals Energy & Currency Research, Religare Securities has said, "In spite of a flurry of positive factors in the current environment, there are still growth concerns. Further uptick in domestic currency seems implausible unless the level of 61 (spot)is convincingly breached ,as it has been acting as a stiff hurdle restricting further appreciation of rupee since last 5 months." 

Commenting on the level where the rupee is headed, Sachdeva is of the view that rupee is expected to march toward 61 mark in spot market and may stabilize around the same in near term. 

Demand for dollar: Higher demand for dollars from importers and rise in the greenback after strong non-farm payrolls data in the US last week will also put a halt to rupee's appreciation in the near-term, say bankers and experts. 

"The rupee is at the 61 level, and at this level we will see lot of buying coming in from importers," said KN Reghunathan, treasurer at the state-run Union Bank o .. 


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