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The US rating downgrade will have an impact on the currency market and trade flows, Mr H.S. Upendra Kamath, Chairman and Managing Director, Vijaya Bank, told Business Line . “The Indian rupee will now become strengthened vis-à-vis the dollar. But with the rupee strengthening, exports to the US economy might get slightly affected. The US rating downgrade will also result in the capital flow into India getting affected.” he said.
Hence, exporters will now have to diversify their export markets. Compared to the dollar, the Swiss Frank and yen will become better currencies henceforth, he said. Gold will now be looked at as an alternative investment avenue.
Though Indian banks, per se, do not invest in the US treasury bills, Mr Kamath said that branches of Indian banks located in the US would be impacted slightly, as they could have invested in these bills for liquidity purposes. “But credit downgrade from AAA to AA is still an investment grade,” he said. However, he cautioned that banks will have to be more careful in the future.
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