Asia's worst-per­form­ing cur­rency may be best bet this year

The Pak Banker - - MARKETS/SPORTS -

In­vest­ing in Asia's worst-per­form­ing cur­rency is all about the in­ter­est rate. While the ru­pee fell 0.3 per­cent ver­sus the dol­lar this year, flows from stock in­vestors turned pos­i­tive in March amid slower in­fla­tion, an im­proved cur­rent ac­count and bud­getary dis­ci­pline.

In­clud­ing in­ter­est, in­vest­ing in ru­pees will earn 2.5 per­cent from now un­til Dec. 31, ac­cord­ing to strate­gists' fore­casts, the most in emerg­ing Asia.

"The ru­pee re­mains a very at­trac­tive play over a one-year hori­zon," said Vi­raj Pa­tel, a Lon­don-based strate­gist at ING Groep NV, among the most-ac­cu­rate ru­pee fore­cast­ers in Bloomberg's rank­ings. "Lower in­fla­tion, a sub­dued cur­rentac­count deficit, high growth and carry will all pay div­i­dends in the fu­ture as the global econ­omy turns the cor­ner."

In­ter­est rates be­low zero in Europe and Ja­pan are at­tract­ing in­vestors to a na­tion that has the sec­ond-highest yield among key Asian mar­kets and the fastest growth among ma­jor economies. The ru­pee's al­lure has been bur­nished by cen- tral bank Gover­nor Raghu­ram Ra­jan's suc­cess in re­plen­ish­ing for­eign-ex­change re­serves and tam­ing con­sumer prices and the trade deficit. Prime Min­is­ter Naren­dra Modi's Feb. 29 bud­get sparked a rally in In­dia's ru­pee, bonds and stocks as the gov­ern­ment's re­solve to nar­row the fis­cal deficit to a nine-year low boosted in­vestor sen­ti­ment. Data show­ing in­fla­tion eased to a four-month low in Fe­bru­ary also in­creased odds of in­ter­est-rate cuts by Ra­jan, while de­mand for emerg­ing-mar­ket as­sets has picked up amid global cen­tral bank stim­u­lus.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.