Rupee May Return To Near Pre-Covid Levels By March, Says Nomura

Nomura expects the rupee to bounce back to 72 per dollar by end-March

The rupee is set to recover by March to levels seen before the coronavirus pandemic, thanks to a rare current account surplus and expectations that the central bank may be more tolerant of a stronger currency, according to Nomura Holdings Inc.

Nomura expects the rupee to bounce back to 72 per dollar by end-March, a level last seen in February. It sees sluggish oil prices to act as a tailwind for the net oil-importing nation, setting it on course to record its first current-account surplus since 2004.

“We see the rupee as an outperformer versus other high yielders,” said Dushyant Padmanabhan, strategist at Nomura Holdings in Singapore. The rupee is “placed quite well – the balance of payment improvement has been quite dramatic, and continues to benefit from the recent drop in oil prices.”

India’s currency rose from a two-month low last week ahead of US election results to 74.3725 per dollar on Wednesday. The rupee is Asia’s worst performer with a year-to-date loss of 4 per cent. Traders have blamed heavy currency intervention by the Reserve Bank of India, though the nation’s economic outlook has also been blighted by the region’s biggest virus outbreak.

.

Padmanabhan sees the central bank changing its approach, especially as the broader risk-on sentiment after the US election helps. “There are some reasons to expect the RBI to taper intervention – such as the already-elevated reserves and focus on transmission,” he said.

Signs of an economic recovery are also supporting the case for the rupee’s appreciation. The manufacturing purchasing managers index rose to its highest in about a decade last month, while foreign-direct investments surged 13 per cent in the April-August period from a year ago.

Not everybody shares Nomura’s optimism. ICICI Bank Ltd.’s sees the rupee closer to 74 per dollar by fiscal year end. “The rupee remains overvalued in terms of RBI’s real effective exchange rate (REER) by more than 17 per cent,” B Prasanna, head of global markets, sales, trading and research said. That’s partly due to higher domestic inflation, and the RBI intervention is to manage this overvaluation, he added.

.

Disclaimer: This post has not been edited by our staff and is published from a syndicated feed. The Original Source of this post can be found at Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest

CPI(M) not averse to ED questioning Kerala CM’s additional secretary Raveendran

He has been summoned in connection with suspected kickbacks in various infrastructure contracts. The CPI(M) is reportedly not averse...

Thailand’s pro-democracy protesters warn of possible coup

The protest movement’s core demands are for Prime Minister Prayuth Chan-ocha and his government to step down Pro-democracy demonstrators in Thailand, undeterred by arrest warrants...

States must rise above politics to check Covid spread, says SC

The Supreme Court on Friday highlighted the utter disregard for social distancing norms across the country looking to tackle the Covid-19 pandemic, and warned...

When Yami Gautam told her parents about the subject of Vicky...

Yami Gautam burst on the Bollywood scene in 2012 with Shoojit Sircar’s Vicky Donor, in which she starred opposite Ayushmann Khurrana. She made a...

More Articles