Bankers see no immediate QE impact on rupee

The ghost of the US Federal Reserve’s quantitative easing or QE-II is out and doesn’t seem to terrify bankers as it’s out in the open and almost as expected. The US Fed yesterday said it plans to buy back $600 billion of bonds to infuse liquidity in its system as part of an effort to revive the US economy. Stocks and commodities across the world edged up after the announcement.

The Indian rupee gained to 44.21 per dollar, from its previous closing of 44.36 per dollar. The Sensex index of the Bombay Stock Exchange gained 428 points to 20,894 points.

“It is in line with the expectations,’’ said Priyanka Chakravarty, FX strategist at Standard Chartered in Mumbai. “There is not much downside left (for the dollar).’’

The outlook on the rupee will depend on the capital inflows. Chakravarty retains her December-end forecast for the rupee at 45.5 per dollar. Many bankers expected the US easing to involve about $500 billion, while a few also speculated a higher figure.

Royal Bank of Scotland forecasts the rupee to trade at 44.50 per dollar by March-end, or almost near the current levels. The bank expects the rupee to decline a bit to 45 per dollar by December-end, said Ramit Bhasin, managing director and head of global markets at Royal Bank of Scotland.

“I would be nervous about the large IPOs and hope the inflows are not lumpy,’’ said Bhasin.

Coal India Ltd’s Rs 15,400-crore initial sale of shares last month, the country’s largest till date, was over-subscribed over 15 times. Since a large portion of the IPO was subscribed to by foreign institutions, India witnessed a huge amount of potential overseas inflows that could disrupt the local foreign exchange market.

“The rupee can witness creeping appreciation if the dollar weakens against other major currencies and the Indian stock markets attract more funds,’’ said Hitendra Dave, managing director and head of global markets at HSBC in Mumbai. “A bulk of it (quantitative easing) has already been priced in. Oil and other imports too are still large.’’