The rupee is expected to appreciate further in 2011 on the back of overseas investors pumping money in India due to strong gross domestic product (GDP) growth story, high interest rates and good corporate earnings.
The rupee is expected to appreciate further in 2011 on the back of overseas investors pumping money in India due to strong gross domestic product (GDP) growth story, high interest rates and good corporate earnings.
We spoke to eight experts and five of them have an appreciation bias.
Based on the range given by the eight experts, the trading range is seen at Rs43 to Rs47.50 per dollar in 2011.
During the first half of the year, the rupee will remain volatile and at that time it may weaken a tad. But in the second half the rupee will strengthen.
“For the first half it will trade volatile and mostly touch a high of Rs45.80 per dollar by June 2011 due to Euro zone risks. But in the second half of the calendar year we see the trajectory to reverse,” said Priyanka Chakravarty, forex strategist, Standard Chartered Bank.
In the second half, Asia growth is expected to rebound and by then other risks would be at bay.
During that time the policy intervention on global front would take care of the risks. So by the last quarter (October to December) of 2011 the rupee should be at Rs43 per dollar, said Chakravarty.
The strengthening of the rupee will also be driven by the India growth story.
According to Gopal Bhattacharya, head of global markets (India), Societe Generale, we should have another good year of economic growth in 2011 with the country’s growth staying above 8%, mostly led by robust domestic consumption.
Bhattacharya expects the local currency to trade in the band of Rs43-46 per dollar with a positive bias, as he feels India is expected to draw higher investments in both foreign direct investments and financial markets.
India’s gross domestic product was up 8.9% during the July-September quarter of the current financial year.
But there are few who have raised concerns on the current account deficit and they feel this may impact the appreciating rupee against the dollar.
“Current account deficit is going to widen in the next calendar year. The reason being imports have been growing at a rapid pace. It would translate into trade deficit and if the capital account is unable to take care of this gap then the rupee would weaken against the dollar,” said R V S Sridhar, head of global markets, Axis Bank. Sridhar expects to see the currency in the 44-47 per dollar with a weakening bias.
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