Going by the slogan of a TV commercial of a leading plywood brand, the dollar fetching 45 units of the Indian currency may not happen during our lifetimes. Fortunately, bankers and financial experts are a little less despondent, though realistically they say, it could be some months, or maybe even some quarters, before the rupee returns to the pre-50 level.
This, despite the Reserve Bank of India (RBI) having taken a series of measures aimed at boosting dollar inflows to prop up the rupee. While the momentum may have been arrested, the slide has continued.RBI’s first step to prop the rupee was increasing foreign institutional investor (FII) limit in government and corporate debt by $5 billion each, seven weeks back, when one dollar was quoting at Rs50.7.
“It will be another three to six months before the rupee finally appreciates to above the 50-level. There are a number of factors against the rupee appreciating — high oil prices and the turmoil in the euro zone being two major ones,” said Ramit Bhasin, MD and head of markets, RBS. He adds that all that the RBI measures did were cut out the volatility, curb speculation and stabilise the rupee around the 52/53 levels. “They could have acted earlier, so in that sense their measures were a little too late,” said Bhasin.
“We expect rupee to be in the range of 50-52 against dollar in 2012-13. We do not expect any sharp depreciation in the value of rupee from this range as it has seen most of the damage in 2011,” said Vinay Khattar, Head Research – Retail Capital Markets, Edelweiss Securities.
Bhasin of RBS says that in Real Effective Exchange Rate (REER) terms the rupee looks cheap and near the 2008 trough, when a dollar fetched Rs48.45.