Sailesh K. Jha, the Singapore-based head of Asia markets strategy at Skandinaviska Enskilda Banken AB, comments on the outlook for the rupee in a report published today.
The currency fell 0.7 percent yesterday to 53.2250 and touched a record-low 53.52. It has slid 16 percent this year, the worst performance among Asia’s 10 most-traded currencies.
“The risks that the rupee prints 60 in the first half of 2012 can’t be ruled out.
“The balance of payments is probably already in deficit and will remain so in the first quarter of 2012. Importers’ hedging of currency risk has been limited, and risks of a dollar funding squeeze need to be considered as global risk appetite continues to soften into the first quarter.
“Large trade deficits will remain on back of strong imports of oil, gold and consumer goods. This will outweigh the impact of a recovery in exports of processed crude-oil products, chemicals and machinery exports.
“From a capital flows perspective we anticipate continued net outflows from the equity market into the first half as uncertainty on the outlook for India’s growth, inflation and macroeconomic policies lingers.”