Rupee strengthens as Q4 CAD of 2012-13 moderates sharply

CAD moderated to 3.6% of GDP in Q4 2012-13

The rupee recovered against the dollar in early trades on Thursday after there was a sharp moderation in current account deficit (CAD) for the fourth quarter (Q4). 

 

The CAD moderated sharply to 3.6% of Gross Domestic Product (GDP) in Q4 of 2012-13 from a historically high level of 6.7% of GDP in third quarter of 2012-13 as trade deficit narrowed.

 

At 12:05 pm, the rupee was trading at Rs 60.40 against the dollar compared with previous close of Rs 60.73. Yesterday the rupee touched Rs 60.77 per dollar during intra-day trades which was the all-time trading low so far.

 

According to Pramit Brahmbhatt, chief executive officer, Alpari Financial Services the rupee is seen strengthening from current levels as the market has already factored in that eventually the US Fed will pull back quantitative easing. However, he also added that the Indian economy should not throw any negative surprises.

 

According to dealers despite the moderation in CAD, the rupee continues to trade above the Rs 60 per dollar mark because during 2012-13, CAD stood at $ 87.8 billion (4.8% of GDP) as against $ 78.2 billion (4.2% of GDP) during 2011-12.

 

Burgeoning trade deficit along with significant decline in invisible earnings caused widening of CAD during the year.