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Better-placed rupee may trade between 60-64/$ during January-March

A broader range is set between 60 - 64 taking into account a spike either way due to inflation and even more importantly general elections.

, ET Now|
Updated: Dec 20, 2013, 11.40 AM IST
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The Fed’s asset purchases have been in place for the past 15 months and which led to weakening of the dollar. The fresh move strengthened the US dollar against most of the major currencies.
The Fed’s asset purchases have been in place for the past 15 months and which led to weakening of the dollar. The fresh move strengthened the US dollar against most of the major currencies.
MUMBAI: The Indian rupee hit 2-week low as it reacted to the US Federal Reserve’s decision to trim QE3 by $10 billion. The US Fed, from January 2014 onwards, will purchase $ 40 billion in treasuries and $ 35 billion in mortgage bonds on monthly basis. The US is now confident on inflation and jobs numbers. The Fed has added that the overall monetary policy will remain accommodating.

The Fed’s asset purchases have been in place for the past 15 months and which led to weakening of the dollar. The fresh move strengthened the US dollar against most of the major currencies.

Even as the Indian rupee corrected in a knee-jerk reaction, it portrayed a certain sense of calm unlike in June-July when it went on to hit record lows. While the global uncertainty is still on, the domestic situation has stabilised to a great extent.

However, there are still some issues that remain to be a concern. The gold import curbs needs to be relaxed. Other issues like iron ore exports and coal reforms need to be addressed. Only after these are dealt with, will the situation move towards normalcy.

The positives are that FII debt pullout, according to most of the analysts, has bottomed out. The new RBI chief’s measures have also worked well. The equities are seeing strong inflows. The $35 billion of inflows from FCNR and the recently concluded bank borrowing schemes have been successful. The CAD also has been contained and India is going into the New Year with more hope and less economic vulnerability.

Bankers are expecting some volatility on outflows in January 2014, when tapering actually starts. But again, the markets are ready for it. A majority of market participants are working with a range bound controlled rupee moves between 61.5 and 63.5 per dollar for most part of January to March 2014.

A broader range is set between 60 - 64 taking into account a spike either way due to the Indian inflation and growth numbers and even more importantly the Country elections.

On May 20, after the Fed Chief Ben Bernanke announced the possibility of a tapering, all hell broke lose. The emerging equity markets and currency markets went if for a free fall. It was a clear case of Fear Vs Facts.

The markets since then have been waiting and preparing for the Fed to actually move towards tapering. Most people aren’t surprised by the quantum but they are more taken aback by the timing.

And as mentioned by Bernanke himself, tapering is going to be done in a measured way, and it wont be the last that that the Fed will cut its signature bond-buying program.



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