 "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.
HSBC says RBI will focus on minimising FX volatility, with measures such as setting up dollar purchasing window for oil companies.
Reuters