HDFC Bank, in its monthly report update on economy and markets, has forecast that rupee, like other Asian currencies, can weaken and move to 52 levels by March '09.
Rupee was trading at about 50.29 levels on Monday.
Although the report has factored in fall in oil prices, it has pointed out that there would be large amount of repatriation of short-term debt over the next few months, which would influence the dollar-rupee movement.
The rupee is unlikely to buck the depreciation trend of other Asian currencies. Global rather than domestic fundamentals are likely to drive the rupee over the next six months and most of the pressures on emerging markets is likely to apply for the rupee as well, it said.
It said policy measures could reduce some pressure and ensure a more orderly depreciation path for the rupee. "We expect the dollar-rupee to trade around 50.50-51.00 band in December '08 and around the 52.00-mark in March '09.", the monthly report said. In the longer term, however, the bank expects rupee to strengthen and to move to 46\47 levels by December 2009. The monthly said given the strong possibility of recession in G-7 countries and deterioration in growth conditions elsewhere, internationally the trend will be to buy US treasury securities and thus resulting in demand for dollar and fall in rupee and other currencies. It said historically, then dollar has outperformed other currencies in times of global recession. Referring to the global recession, it said global growth of less than 2.5 per cent is generally considered as recession. According to the report, there is large amount of short-term debt repatriation that is likely to take place over the next six months from India. It said that out of the $89 billion of short-term debt close to $67 billion is due for repatriation over the next nine months. The possibility of roll-overs is limited in the current tight funding global environment, it pointed out. "We expect some marginal respite for the rupee in the January-March09 quarter on account of a seasonal pick-up in software exports and private transfers. Besides, sharp fall in global crude prices could reduce some of the pressures from oil importer demand. However, this should not be confused for a trend reversal as outflows and short-term debt repatriation is likely to persist well in to Q2 of FY'09, the monthly report said. Referring to the possible revival, it said economies with strong domestic supports like India will be the first among Asian emerging markets to move back on investors radar screens.
"However, we would warn that any revival in risk appetite or search for high yielding returns (like shares) is some distance away," the report said.
