Rating agency Crisil today said it expects the rupee, which has been at the receiving end for quite some time and hit an all-time low of 57.32 to the dollar recently, will regain the 50 level by March-end subject to the government taking measures to revive growth.
The domestic currency will appreciate to touch the 50 level by next March provided certain measures are taken by the government urgently, the rating agency’s research wing said in a note.
Measures like initiation of some policy measures to revive the sagging growth, no further worsening of growth and inflation and an easing of current account deficit due to softening of crude and commodity prices will help in the revival of the currency, the report said.
The note gave a chance of two in three for the rupee to appreciate to 50 levels to the dollar by the fiscal-end if there is improvement in the sentiment. Whereas, there is a one-third possibility of the rupee continuing to trade in the 55-57 range in case of a status quo in domestic policy setting, and no change in the eurozone problems and the ongoing global turbulence.
The rupee has lost over 27 percent since last August to earn itself the distinction of being the worst performing currency in Asia due to various factors like worsening of the current account deficit and dwindling capital inflows because of investor doubts.
During early trade today it gained 6 paise to the dollar and was trading at 55.55. The recent downfall has seen it touch an all-time low of Rs 57.32 to the dollar intra-day and a closing low of 57.14 on 22 June.
Crisil said the recent fall in the rupee is characterised by higher impact of the country’s rising vulnerability and relatively lower impact of external shocks.
The vulnerability arises from several factors like widening current account deficit, which touched a two-decade high of 4.2 percent last fiscal, declining import cover of foreign exchange reserves, a high private corporate debt servicing burden and slower growth, it said.
The shock element is much lesser as there are no events like the folding up of Lehman Brothers in 2008, in the US which are on the horizon, it said.
(curtsey : first post)
Head Research Department