Rupee’s rise may not continue, say analysts

On Thursday, IT blue chip Infosys said fluctuations in the rupee rate had resulted in a loss of Rs 147 crore or 200 basis points during the third quarter. In fact, most IT companies and exporters are preparing to factor in the recent losses on account of the rupee. Reason: the rupee had sharply appreciated against the US dollar in the last several months, bringing down their export earnings in rupee terms.

Forex analysts and bankers say the upward march of the rupee is unlikely to continue in view of a host of imminent regulatory as well as market factors. From the level of 47 last year, the Indian currency had risen by 5.3 per cent to the current 44.50. “The sustained rise in the rupee value of over 3 per cent in the last quarter hit exporters quite hard. The fall in crude oil, weak dollar abroad and high inflow through the foreign institutional investors played a big role in the rise,” said a forex dealer with a private bank.

“This appreciation can be attributed to the robust growth in the economy which rose by 9 per cent in the quarter ended September 2006. In six quarters out of the past seven, GDP growth has exceeded 8 per cent and was among the strongest increases the country has ever recorded,” said Rishi Sahai, director, IndusView.

However, the situation is likely to change now. “The dollar which was weakening abroad — particularly against the euro — has been gaining strength of late. Moreover, Reserve Bank of India (RBI) is expected to take measures to fight inflation which will have a sobering impact on the currency,” said an analyst with Mecklai Financial. “The currency is likely to be in a range of 44.50-45.50 in the next a few months,” said a dealer.