09-30-2008, 10:20 AM
Indian Rupee's `Unprecedented' Decline Not Over, Treasurers Say <!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Dwindling capital inflows, elevated oil prices and slowing economic growth will undermine the rupee, said Yeshwant M. Deosthalee, chief financial officer at Mumbai-based Larsen & Toubro, India's biggest engineering company. A weaker currency may also exacerbate an inflation rate near a 16-year high by increasing import costs, said Ravi Sud, chief financial officer at Hero Honda, the nation's largest motorcycle maker.
``The drop in the rupee is unprecedented and never have I seen such a move in my 28-year career, barring the devaluation in 1991,'' said N.S. Paramasivam, who trades an average $200 million a day as head of treasury in Mumbai at Essar, which has businesses in shipping, steel and oil. ``The downside risk to the rupee is mostly emanating from lack of dollar supply.''
<b>The rupee has dropped 16 percent this year, heading for its worst annual performance since 1991, when India devalued the currency as a balance-of-payments crisis forced it to pawn gold from its reserves</b>. Exporters and importers alike are struggling to cope with as the exchange rate has swung between a decade- high and a 26-month low within a year.
<b>Price Swings </b>
The rupee touched 47.115 a dollar yesterday, the lowest level since June 3, 2003, after reaching 39.185 on Nov. 7 last year, its strongest since February 1998. Essar's Paramasivam predicts the currency, which was at 46.955 late yesterday in Mumbai, will trade between 45 and 47.50 over the next six months.
<b>India's current-account deficit may widen by $12 billion in the financial year ending March 31, 2009, after reaching a record $17.7 billion the previous year, he said. Imports exceeded exports by $10.8 billion in July, the most ever</b>.
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India's foreign-currency reserves were $282.8 billion as of Sept. 19, down from a record $316.2 billion four months earlier, central bank figures show. The drop indicates policy makers sold dollars to bolster the rupee.
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<b>``India still is a domestic-demand driven economy,'' </b>he said. ``That will soothe sentiment sooner or later.''
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``The drop in the rupee is unprecedented and never have I seen such a move in my 28-year career, barring the devaluation in 1991,'' said N.S. Paramasivam, who trades an average $200 million a day as head of treasury in Mumbai at Essar, which has businesses in shipping, steel and oil. ``The downside risk to the rupee is mostly emanating from lack of dollar supply.''
<b>The rupee has dropped 16 percent this year, heading for its worst annual performance since 1991, when India devalued the currency as a balance-of-payments crisis forced it to pawn gold from its reserves</b>. Exporters and importers alike are struggling to cope with as the exchange rate has swung between a decade- high and a 26-month low within a year.
<b>Price Swings </b>
The rupee touched 47.115 a dollar yesterday, the lowest level since June 3, 2003, after reaching 39.185 on Nov. 7 last year, its strongest since February 1998. Essar's Paramasivam predicts the currency, which was at 46.955 late yesterday in Mumbai, will trade between 45 and 47.50 over the next six months.
<b>India's current-account deficit may widen by $12 billion in the financial year ending March 31, 2009, after reaching a record $17.7 billion the previous year, he said. Imports exceeded exports by $10.8 billion in July, the most ever</b>.
.........
India's foreign-currency reserves were $282.8 billion as of Sept. 19, down from a record $316.2 billion four months earlier, central bank figures show. The drop indicates policy makers sold dollars to bolster the rupee.
......'
<b>``India still is a domestic-demand driven economy,'' </b>he said. ``That will soothe sentiment sooner or later.''
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