Dollar may touch Rs 50 in two months, feel experts

9 Oct, 2008, 1700 hrs IST, PTI
NEW DELHI: Indian currency may lose further ground and dollar is likely to touch Rs 50 in the next two months in the wake of global financial crisis, say exporters and economists.

With foreign institutional investors (FIIs) pulling out of the equity markets in the emerging economies, rupee touched a six-year low of 48.47 against dollar yesterday.

If the prevailing sentiment for withdrawal of portfolio funds continues and RBI does not intervene, the dollar can touch Rs 50 in the next 2-3 months, ICRIER Director Rajive Kumar said.

The FIIs have net sold USD 120 million from India in the last three months with the global equity markets receiving a thrashing after collapse of several banks in the US and Europe.

With erosion of over 20 per cent rupee value since April this year, exporters are laughing their way to bank on increased realisations, though some of them got trapped in the exotic derivative contracts of the previous year.
While they want stability in the foreign exchange market, exporters seem to nurse a desire of the rupee touching 50.

"If this trend continues, the domestic currency will touch 50 against dollar in the next two months," Federation of Indian Export Organisations Director General Ajay Sahai said.

On the back of windfall resulting from currency depreciation, India's exports surged by 35.1 per cent between April and August this fiscal.

However, import increase of 37.7 per cent has left a big trade gap of USD 49 billion in the five months of the current fiscal. The trade gap could exert further pressure on the overall current account situation of the country.

The demand for dollar is still high from the oil industry despite a sharp fall in the crude oil prices.
"The scenario is volatile. The rupee would be under pressure but it will remain within 50 mark," CRISIL Principal Economist D K Joshi said.

Notwithstanding the fact that India is sitting on a foreign exchange reserve of USD 292 billion, the FIIs are fleeing the equity markets impacting the overall sentiment.

"Though it is difficult to pinpoint the number, it can touch Rs 50 if the current depreciation trend continues," Punjab National Bank General Manager, Treasury Arun Kaul said.

Via:E.T