New Delhi: The rupee could touch 75 per dollar by the end of 2014 if the status quo remains, Bank of America Merrill Lynch said in a report today. The Reserve Bank of India or RBI will have to take far more pro-active steps to rebuild Forex or foreign exchange reserves, it said.
"A conservative estimate is USD/INR goes to 70 year-end and 75 by-end 2014 based on ND F forward pricing," BofA-ML said
NDF or non-deliverable forward deals are forward transactions settled in dollars because the rupee, being a non-convertible currency, cannot be 'delivered' outside India.
About a week back Deutsche Bank had said the rupee may touch 70 per dollar in a month. Even till a month back, many analysts were predicting the rupee touching 65 against the dollar by next year as the worst case scenario.
Just when one thinks the rupee may have bottomed out, it goes on to hit a new low. The spiral down of the rupee has been a sharp one, falling over 20 per cent in the last three months.
The rupee yesterday had collapsed to a lifetime low of 68.85 against the dollar and closed at 68.80, registering its biggest single-day loss of 256 paise, as global oil prices jumped, deepening concerns about the current account deficit and capital outflows.
The rupee today however, recovered from its all-time low by rising 170 paise to 67.10 against the dollar in early trade on fresh selling of the US currency by exporters and banks amid fresh measures announced by the RBI to check free-fall of the currency.
RBI yesterday opened a special window to help the three state-owned oil marketing companies needing about $8.5 billion every month to meet their daily foreign exchange requirement in a bid to check the rupee's free fall.
"We welcome yesterday's initiatives to provide RBI swaps to fund oil imports and seek swap lines against trade arrangements as short-term relief. Yet, to stabilise INR expectations, we believe that the Reserve Bank of India (RBI) will have to take far more pro-active steps to rebuild FX reserves," the report said.
The RBI should launch a scheme to attract significant forex inflows where the rupee risk would be borne by the RBI to comfort investor confidence like issue of NRI or sovereign bonds or reviving FCNRA or foreign currency non-resident accounts deposits.
"We ourselves estimate that the RBI would be hard pressed to sell $25 billion, and every US dollar sold will likely only raise further questions about the adequacy of forex reserves," the report noted.
"A conservative estimate is USD/INR goes to 70 year-end and 75 by-end 2014 based on ND F forward pricing," BofA-ML said
NDF or non-deliverable forward deals are forward transactions settled in dollars because the rupee, being a non-convertible currency, cannot be 'delivered' outside India.
About a week back Deutsche Bank had said the rupee may touch 70 per dollar in a month. Even till a month back, many analysts were predicting the rupee touching 65 against the dollar by next year as the worst case scenario.
Just when one thinks the rupee may have bottomed out, it goes on to hit a new low. The spiral down of the rupee has been a sharp one, falling over 20 per cent in the last three months.
The rupee yesterday had collapsed to a lifetime low of 68.85 against the dollar and closed at 68.80, registering its biggest single-day loss of 256 paise, as global oil prices jumped, deepening concerns about the current account deficit and capital outflows.
The rupee today however, recovered from its all-time low by rising 170 paise to 67.10 against the dollar in early trade on fresh selling of the US currency by exporters and banks amid fresh measures announced by the RBI to check free-fall of the currency.
RBI yesterday opened a special window to help the three state-owned oil marketing companies needing about $8.5 billion every month to meet their daily foreign exchange requirement in a bid to check the rupee's free fall.
"We welcome yesterday's initiatives to provide RBI swaps to fund oil imports and seek swap lines against trade arrangements as short-term relief. Yet, to stabilise INR expectations, we believe that the Reserve Bank of India (RBI) will have to take far more pro-active steps to rebuild FX reserves," the report said.
The RBI should launch a scheme to attract significant forex inflows where the rupee risk would be borne by the RBI to comfort investor confidence like issue of NRI or sovereign bonds or reviving FCNRA or foreign currency non-resident accounts deposits.
"We ourselves estimate that the RBI would be hard pressed to sell $25 billion, and every US dollar sold will likely only raise further questions about the adequacy of forex reserves," the report noted.
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