Indian currency headed up
Monday, September 24, 2007
INDIA'S rupee is set to head higher against the US dollar as foreign investors pour money into the rapidly growing economy and the only question is how fast the currency will rise, analysts say.
Lifted by a tide of overseas money into domestic shares following a cut in US interest rates, the Indian currency strengthened beyond the psychologically key 40 rupees to the US dollar barrier for the first time in nine years last week.
The rupee closed on Friday at 39.87 to the US dollar and analysts expect it to gain further in coming months as foreign investors buy shares and pour money into plants and infrastructure projects to exploit the booming economy.
"We're looking for a rupee of around 39 to the dollar by year end and for the rupee to go to around 38.5 or 38 to the dollar by mid next year," said Richard Yetsenga, HSBC's Asia currency strategist in Hong Kong.
"The rupee is definitely going up" but the speed of its rise "entirely depends on how vigorous (central bank) authorities are in slowing the rupee's appreciation," Yetsenga said.
The central bank has "expressed its desire for slow rupee appreciation but pressure on the rupee (to rise) is so fundamental and robust" that a level of 35 rupees to the US dollar "is not out of the question" he said, not specifying a timeframe for such a move.
The rupee has already risen by 11 per cent this year against the US dollar, making it Asia's best performing currency.
Foreign funds have invested US$10.47 billion in Indian equities so far in 2007, more than twice the US$4.69 billion they pumped in during the same period last year, lured by record economic expansion. India logged first-quarter growth of 9.3 per cent the world's fastest after China.
BNP Paribas country treasurer Manoj Rane forecast the rupee would "rise further on the back of strong capital inflows", adding the currency could touch 38.50 levels against the US dollar by year end.
The rupee got its latest burst of wind last Tuesday when the US Federal Reserve cut rates by a surprise 50 basis points to ease credit stress that threatens the world's biggest economy.
Typically when the Fed lowers rates, investors start looking for higher returns in emerging markets.
The benchmark Bombay Stock Exchange Sensitive Index or Sensex has climbed by 5.7 per cent to a record 16,564.23 points since the rate cut with investors seeing India as a haven from international sub-prime credit turmoil.
While the nation of 1.1 billion people has been gradually easing rigid state controls on trade and investment and opening up its economy, it remains far less exposed to global financial upheaval than many countries, economists say. AFP
Lifted by a tide of overseas money into domestic shares following a cut in US interest rates, the Indian currency strengthened beyond the psychologically key 40 rupees to the US dollar barrier for the first time in nine years last week.
The rupee closed on Friday at 39.87 to the US dollar and analysts expect it to gain further in coming months as foreign investors buy shares and pour money into plants and infrastructure projects to exploit the booming economy.
"We're looking for a rupee of around 39 to the dollar by year end and for the rupee to go to around 38.5 or 38 to the dollar by mid next year," said Richard Yetsenga, HSBC's Asia currency strategist in Hong Kong.
"The rupee is definitely going up" but the speed of its rise "entirely depends on how vigorous (central bank) authorities are in slowing the rupee's appreciation," Yetsenga said.
The central bank has "expressed its desire for slow rupee appreciation but pressure on the rupee (to rise) is so fundamental and robust" that a level of 35 rupees to the US dollar "is not out of the question" he said, not specifying a timeframe for such a move.
The rupee has already risen by 11 per cent this year against the US dollar, making it Asia's best performing currency.
Foreign funds have invested US$10.47 billion in Indian equities so far in 2007, more than twice the US$4.69 billion they pumped in during the same period last year, lured by record economic expansion. India logged first-quarter growth of 9.3 per cent the world's fastest after China.
BNP Paribas country treasurer Manoj Rane forecast the rupee would "rise further on the back of strong capital inflows", adding the currency could touch 38.50 levels against the US dollar by year end.
The rupee got its latest burst of wind last Tuesday when the US Federal Reserve cut rates by a surprise 50 basis points to ease credit stress that threatens the world's biggest economy.
Typically when the Fed lowers rates, investors start looking for higher returns in emerging markets.
The benchmark Bombay Stock Exchange Sensitive Index or Sensex has climbed by 5.7 per cent to a record 16,564.23 points since the rate cut with investors seeing India as a haven from international sub-prime credit turmoil.
While the nation of 1.1 billion people has been gradually easing rigid state controls on trade and investment and opening up its economy, it remains far less exposed to global financial upheaval than many countries, economists say. AFP
Business Besides Oil
