BS POLL: Rupee likely to weaken in a month

Rupee ended at Rs 61.80 on Monday compared with previous close of Rs 61.44

Currency experts, on average, feel the rupee could weaken in a month, as the Street expects the US shutdown fear to wane.

A median forecast poll from 10 such experts, done by Business Standard on Monday, says the rupee is expected to trade at 62.25 a dollar a month from now. The rupee ended at 61.80 on Monday, compared to Friday’s close of 61.44. The weakness was due to dollar demand from private sector oil marketing companies and other corporate groups, said dealers. On Saturday, US President Barack Obama said he did not expect to have to take any unusual steps to prevent the country from defaulting on its debt. This is because he believes Congress, the national legislature, will raise the debt ceiling before the October 17 deadline.

“After the US shutdown problem is solved, the rupee will start weakening from current levels. Too much of optimism has built up in the market. The speculation of the US Fed (the American central bank) tapering (its bond buying programme) has been totally out for a while,” said  Abhishek Goenka, head, India Forex Advisors. Later this month the US central bank’s Federal Open Market Committee (FOMC) will meet again and Goenka believes at that time, concerns on  tapering of the third round of its quantitative easing programme will once again surface.

Some experts even see the rupee weakening sharply over the next month. “The rupee can go back to 65-66, as in the next FOMC meeting, there are very high chances that they will go for tapering; they wanted to start the process sometime in December,” said Pramit Brahmbhaat, chief executive, Alpari Financial Services, (India). In the current financial year, the rupee has weakened by almost 14 per cent. In August, it had touched an all-time low of 68.85 to the dollar in intra-day trade. The Reserve Bank of India has taken a host of measures to arrest the volatility, resulting in some stability.

A few believe the rupee will strengthen. “Foreign Currency Non-Resident Account (Banks) or FCNR(B) deposits, tier-1 capital flows and export flows will help the rupee to appreciate. The (US Fed) tapering will get deferred, even in the  December meeting because if the US shutdown effect prolongs, then it will affect the GDP growth numbers and the labour numbers. Due to that, they will not be able to start the tapering even in December,” said N S Venkatesh, chief general manager and head of treasury, IDBI Bank and chairman of the Fixed Income Money Market and Derivatives Association of India.