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Barclays sees rupee recovering to 61-level in next 12 months

Barclays sees rupee recovering to 61-level in next 12 months

The global financial services major also said that in the near-term, rupee weakness could persist, especially in the absence of policy initiatives to quickly boost capital flows.

Global financial services major Barclays has said India's efforts to curb imports, improve exports and attract greater remittances may help it to almost fully fund its current account deficit (CAD) this financial year and also help the rupee recover to 61-level against the US dollar in the next 6-12 months.

The rupee on Thursday fell for the sixth session in a row and breached the 65-mark to an all-time intra-day low of 65.56.

"We expect the INR at 61/$in 6-12 months, which partly reflects the current account improvement," it said.

Barclays further said, in the near-term rupee weakness could persist, especially in the absence of policy initiatives to quickly boost capital flows.

"We think recent policy steps have been relatively ineffective at generating near-term flows, and are a drag on the INR," the research note said.

Barclays also said that CAD, which is the difference between the outflow and inflow of foreign currency, has the potential to "surprise favourably".

The financial services firm has cut its FY14 deficit forecast to around $68 billion (from about $80 billion earlier).

"Unless capital flows surprise further to the downside, we think the recent improvements mean India should be able to almost fully fund its current account deficit in FY 2013-14," Barclays said in a research note.

The factors that are narrowing the current account gap include a lower merchandise trade deficit (gold and non-oil, non-gold trade), a steady uptick in services exports and remittance flows, it said.

However, given the present fragile market sentiment, the underlying improvements in India's current account may go unnoticed, it said.

Meanwhile, Finance Minister P Chidambaram on Thursday said the government will make all efforts to contain fiscal deficit at 4.8 per cent and CAD at 3.7 per cent of GDP or $70 billion this financial year. He further said CAD could be even lower than $70 billion.

In the fourth quarter of last financial year, CAD was 3.6 per cent while for the whole of FY13 it stood at 4.8 per cent.

With inputs from PTI

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Published on: Aug 23, 2013, 1:46 PM IST
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