Rupee gains, though deficit widens
Starting the new year on a positive note, the Indian rupee strengthened 31 paise to close at a two-week high of 54.68 against the US dollar on Tuesday, boosted by a deal in the US to avert a ‘fiscal cliff’, but gains were capped by a surge in the current account deficit.
With export growth slowing sharply than imports, the current account deficit during July to September widened to a record high of 5.4% of GDP, from 4.2% in the previous year, according to official data."Today’s strengthening in rupee was a result of euphoria emanating from deal struck by US policymakers," said Abhishek Goenka, CEO, India Forex Advisors. "The deficit will continue to put pressure on the rupee."
Experts believe that the rupee is likely to appreciate in 2013.
“As the inflow of foreign funds rise on revival in investor sentiment, improvement in growth and easing crude oil prices, the rupee is likely to appreciate to 52.50 per dollar by end 2013,” said Arun Singh, senior economist, Dun & Bradstreet India.
In calender year 2012, the rupee tumbled by 189 paise, or 3.56%, from 53.10 on the December 31, 2011. This is the second consecutive year that it has declined.