Ru­pee Could Hit 62.50-62 byMarch

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9% to 58 to a dol­lar — a level last recorded in June three years ago.

The lo­cal unit closed at a two-yearhigh of 63.58 a dol­lar on Fri­day, com­pared with 64.08 on Tues­day, a day be­fore the cen­tral bank’s bi­monthly mone­tary pol­icy that kept the pol­icy stance un­changed at ‘neu­tral’. The ET poll has also sug­gested a clear shift to bullish sen­ti­ment from bear­ish re­flected ear­lier on the ru­pee.

“Prospects of a high real in­ter­est rate have led overseas in­vestors to bet big on In­dia,” said State Bank of In­dia chief econ­o­mist Soumya Kanti Ghosh. “This helps the ru­pee’s steady climb against the dol­lar. Ris­ing un­hedged po­si­tions for im­porters also add to mar­ket spec­u­la­tion that the ru­pee would ap­pre­ci­ate fur­ther from the cur­rent level.”

A ris­ing ru­pee could hit ex­porters, while it may make bor­row­ing in US dol­lars cheaper, with per unit re­pay­ment cost trend­ing down in ru­pee terms.

Real­rateis­thenom­i­nal­ratemi­nus in­fla­tion. There are dif­fer­ent ways of cal­cu­lat­ing the met­ric. It is now a lit­tle over 4% going by the cen­tral bank’s lat­est method of de­riv­ing it — the pol­icy or repo rate mi­nus re­tail in­fla­tion. The real rate was just about 10 ba­sis points, or 0.1%, in Jan­uary2014when­the­cur­rent­cy­cle of eas­ing in repo rates be­gan. Repo rates have fallen about 2 per­cent­age points since then, com­pared with more than a 6 per­cent­age point de­cline in con­sumer in­fla­tion.

To be sure, the most bear­ish call as­sumes the cur­rency will slide to 68 to a dol­lar by March, 2018, while some par­tic­i­pants ex­pect a fall to about 66.

“A com­bi­na­tion of fac­tors is trig­ger­ing the ru­pee’s rise,” said Ashish Vaidya, head of trad­ing and ALM at DBS Bank. “A sta­ble gov­ern­ment, a surge in overseas in­flows, sup­ported by both for­eign di­rect in­vest­ment and for­eign port­fo­lio in­vestors are help­ing, while a fall­ing dol­lar in­dex has added to the mo­men­tum.”

For­eign di­rect in­vest­ment, or FDI, in­flows hit an all-time high of $60.1 bil­lion in 2016-17. For­eign port­fo­lio in­vestors, or FPIs, have in­vested a net of ₹ 1.75 lakh crore this cal­en­dar year in eq­ui­ties and debt, the high­est since 2014. “Also, the mar­kets as­sume no threat from the US rate in­crease, with the Fed­eral Re­serve hint­ing at non-dis­rup­tive with­drawal of liq­uid­ity,” Vaidya said.

63.58

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