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20 Aug 2013
USD/INR goes parabolic, fresh all-time high above 64.00
FXstreet.com (Barcelona) - The USD/INR continues its parabolic moves amid very poor liquidity in the market, which has inevitably led to USD/INR breaking into an all-time high at 64, with no offers still reported by bank sources.
What is driving the USD/INR?
According to Nomura Economist Sonal Varma: "The government continues to adopt a quick-fix approach to current account deficit problems, with the underlying assumption being that the funding gap is a temporary problem, yet the reality is that the current account deficit is high for various fundamental reasons, but nothing much is being done to address that."
Not surprisingly, the Indian Rupee has continued to collapse, with Varma not seeing any quick fixes for the economy anymore. "As we stated after the government's announcements last week on a quick fix to the BOP problem, the risk is that policymakers will need more pressure from a weaker currency to come out with stronger policy responses" the Economist notes.
Varma adds: "In this toing and froing between the government and the Reserve Bank of India, we see greater collateral damage to the economy due to rising bank asset quality concerns, greater stress on corporate balance sheets due to higher leveraging and increased margin pressures, and therefore, much slower economic growth. Hence, we remain negative on India‟s economic outlook over the next 6-9 months."
What is driving the USD/INR?
According to Nomura Economist Sonal Varma: "The government continues to adopt a quick-fix approach to current account deficit problems, with the underlying assumption being that the funding gap is a temporary problem, yet the reality is that the current account deficit is high for various fundamental reasons, but nothing much is being done to address that."
Not surprisingly, the Indian Rupee has continued to collapse, with Varma not seeing any quick fixes for the economy anymore. "As we stated after the government's announcements last week on a quick fix to the BOP problem, the risk is that policymakers will need more pressure from a weaker currency to come out with stronger policy responses" the Economist notes.
Varma adds: "In this toing and froing between the government and the Reserve Bank of India, we see greater collateral damage to the economy due to rising bank asset quality concerns, greater stress on corporate balance sheets due to higher leveraging and increased margin pressures, and therefore, much slower economic growth. Hence, we remain negative on India‟s economic outlook over the next 6-9 months."