Rupee May Slide To 36.73, Say Treasurers

Treasurers expect the rupee to depreciate 36.73 levels against the dollar in the face of large dollar outflows on account of the redemption of the India Development Bonds and the International Monetary Fund loan.

A section of the polled treasurers even felt that the rupee could cross the Rs 38 band over the next 3 to 6 months. They expect the forward premiums to remain flat at around seven per cent as paying pressure from corporates and banks is matched by receiving pressure from exporters. This was as per the results of the quarterly poll conducted by Standard Chartered Banks (SCB) treasury division of the top 100 corporate treasurers.

 

The reason for the rupees depreciation were stated as large dollar outflows expected during 1997 combined with uncertainty on the inflows front. As per the results of the poll, the expected increase in the oil import bill, unlikely portfolio investments and sluggish exports should weaken the rupee despite RBIs build-up of reserves.

The poll said that the expected depreciation of the rupee could cause corporates with large unhedged positions demanding forward covers could cause the premiums to rise marginally.

However, the treasury chiefs indicates that to avoid volatility and to keep the exports profitable, the central bank is likely to allow the rupee to depreciate at a gradual rate of 2.45 per cent over the next six months. This offers an advantage to exporters to sell their export receivable dollars in the forward premium and earn the receive forward.In the domestic section the yield on the treasury bills is expected to ease in the coming months with the six month ruling at a mean of 7.95 per cent.