Rupee may face a tough month ahead on $ woes

Written by feBureau | Mumbai | Updated: Apr 6 2013, 07:07am hrs
Rupee, which fell to a 1-month low on Thursday, may have a tough month ahead as dollar flows are likely to be volatile on worries over European economy and domestic political uncertainties. In a thin trade, rupee recovered by six paise to close at 54.81 on Friday.

Dealers believe rupee could weaken to 55.15 per dollar over next one week and remain in 54.50-55 band for the month.

In the very short-term, we are looking at a range of 54-55/$ for the rupee and a broader range of 53.50-56.50 for a slightly longer period, said Ashish Parthasarthy, head of treasury at HDFC Bank.The significant jump in the current account deficit for October-December and a rather small fall in rupee has made market players all the more cautious for further volatility.

Right now the situation is very dangerous and very precarious, said Jamal Mecklai, head of Mecklai Financial Services. There is a huge current account deficit. The rupee should really be falling sharply, he said in an event earlier this week.

Even companies that are end-users in the market feel rupee is for sure overvalued.

V Thiagarajan, senior vice president and head of forex treasury at Reliance Industries, believes rupee would depreciate further in 2013-14 given the rie in CAD

CAD for 2013-14 could be around $100 billion, Thiagarajan said, adding CAD is the biggest problem for the economy and should be curtailed. Indias CAD for October-December was a whopping 6.7% of gross domestic product at $32 billion. This is worse than the CAD level during the 1991 balance of payment crisis.

Foreign institutional investors have poured in $27 billion into Indian shares and bonds.

Yields ease; auction sees strong demand

Mumbai : Bond yields eased after the country's first debt auction in the new financial year saw strong demand, signalling a robust appetite for debt despite uncertain prospects about whether the central bank would continue to cut interest rates.

The 10-year bond yield closed down 3 basis points at 7.93%. Gains in bond prices also found support as cash conditions improved drastically on the back of government spending. Reuters