The Hindu Business Line : Stanchart sees rupee at 44/dollar by year-end

The rupee could fall in the near term, but would appreciate to 44 against the US dollar by December due to factors such as huge direct investment flowing into India and narrowing of the current account deficit.

"We feel the rupee has weakened enough," said Dr Gerard Lyons, Chief Economist and Group Head of Global Research, Standard Chartered Bank.

Addressing the media on Wednesday, Dr Lyons said the dollar looks vulnerable because of a possible tightening of liquidity. While the dollar could get a near term support if the US Fed raises rates, it could weaken once US rates touch their peak, he said. "The fundamental factor is that the dollar has been weak," he added.

Though the country's current account balance has been an issue of concern because of rising oil prices, the global economy is looking weaker and this could narrow the current account deficit.

As increasing number of foreign investors pick up outright equity stake in Indian corporates, this gives more confidence from the medium term perspective.

GDP for the country is likely to be around 7 per cent in 2006-07, as credit growth is likely to slow down to 20 per cent from over 30 per cent in 2004-2005 and 2005-06.

The world economy is slowing down. In the last three years, the world economy had benefited from factors such as low interest rates and cheap credit. But now with asset price inflation being seen around the world, central banks are becoming more hawkish and tightening liquidity conditions.

"Bank of Japan raising interest rates will push rates in other Asian market and the yen higher," Dr Lyons said.

"As markets' risks increase people become more cautious. In the first phase, people are taking profits on assets that have risen rapidly. An example of this is the recent outflow of funds from the Indian equity market,'' he said.

Difficult times

Global equity markets will have difficult times in the year ahead. Investors may become risk averse and look at fixed income instruments, Dr Lyons said. Yen looks most attractive, as it seems set to appreciate against the dollar. This could also force the yuan and other Asian currencies to appreciate.

More Stories on : Forex | Financial Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Rice exports gather pace as Pak runs out of stocks

Monsoon components falling apart

Motorola to invest $30 m in manufacturing unit in TN

L&T approves 1:1 bonus issue

Stanchart sees rupee at 44/dollar by year-end

Petrol price: 55% taxes

Free pricing for oil PSUs

REL aims to generate 16,000 MW

SemIndia project stone laid; first phase to be ready in 12 months

Nod for STC to export 1.5 lakh t sugar

Mid-cap, small stocks hit downward circuit

USO Fund support for broadband in rural areas

Nilgiri Railway stretches may go private

Pharma, financial services cos bet big on `webinars'