Sebastien Barbe, chief emerging market strategist at Credit Agricole CIB in Paris, comments on the outlook for India’s currency after the Reserve Bank of India tightened rules for rupee forward trading, saying canceled contracts can’t be bought again.
The new rules will take immediate effect, it said in a statement on its website today.
“This is showing the commitment of the RBI to fight further rupee depreciation. Of course you could argue that India also needs to reduce the current account deficit. However, the current account issue can only be fixed in the medium term and the RBI could not wait and had to act in the short term. I think this draws a line in the sand at close to 54 per dollar.
‘‘Our view is that the slowdown in exports will be followed by a decrease in imports and this should allow reduction in the current account deficit, and provide some more support to the rupee in 2012, particularly if risk appetite comes back.’’
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