Rupee seen falling to 56 a dollar
26 Apr 2012
Close on the heels of rating agency Standard and Poor's downgrading of India's sovereign credit rating, European banking major UBS now says the Indian currency, the rupee, could fall as low as 56 to the US dollar.
Like S&P, UBS also bases its projections on India's bulging fiscal deficit and rising debt burden – both domestic and external – and the country's regulatory ambiguity, which prevents the flows of foreign capital.
India's fiscal deficit is widely expected to hit 8.6 per cent in the current fiscal against government's projection of 5.1 per cent.
The Indian economy is also still grappling with the problem of inflation, despite several bouts of Reserve Bank intervention in the system through interest rate hikes.
"In these conditions, there is very little policy easing. So companies and government must now become more efficient if they want to retain/induce that extra dollar from overseas," UBS' economist Philip Wyatt says in the report.
The rupee resumed trading on the interbank forex market slightly higher at 52.66/67 per dollar. It traded in the range of 52.47 and 52.74, before closing at 52.54/55 per dollar.
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