RBI is allowing rupee to weaken gradually: HSBC

HSBC said it will stick to its dollar-rupee end-year target at 57, but warns rising risk cross may overshoot in the near-term. HSBC recommends exposure to dollar-rupee via one-monthNon-Deliverable Forward (NDF), which imply annualised positive carry of 7.8 percent.

RBI is allowing the rupee to weaken gradually, HSBC adds, estimates RBI has sold $5.4 bln in 2012 to defend the currency, “a very small amount given the sizeable move in the currency.”

[caption id=“attachment_354186” align=“alignleft” width=“380” caption=“RBI understands the need for a weaker INR to help address the wide current account deficit. Reuters”]  [/caption]

“RBI understands the need for a weaker INR” to help address the wide current account deficit and because onshore liquidity remains tight, HSBC argues.

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Reuters