Rupee to recover to 59-61 level by year-end: India Ratings

The Indian rupee, which had slumped to its lifetime low of over 68 to a US dollar in August, is expected to recover to 59-61 against the American currency by end of this financial year.

India Ratings & Research in a report said the expectation is based on economic developments in the last one-two months and the likely developments in the remaining months.

"Notwithstanding the likelihood of US Fed reversing the QE (quantitative easing) programme... expect rupee to appreciate in the range of 8-11 per cent from its August-end 2013 level," the Fitch group company said. "This would imply that rupee is likely to appreciate to 59-61 against the USD by end-March 2014," it added.

According to the report, the currency movements over January-May 2013 were more driven by fundamentals while those over May-July 2013 were due to the outflow of portfolio investment triggered by the tapering off of US Fed bond purchase programme.

India Ratings further said the sharp depreciation in the Indian currency was largely due to speculation, ballooning current account deficit (CAD), weakness in domestic economy and strengthening of the US dollar.

The local currency had depreciated to an all-time low of 68.85 on August 28.

"The expectation (on rupee recovering) is based on recent policy measures taken by the RBI, resumption of capital inflows, passage of economic reform bills in the recently concluded Parliament session, lower CAD in FY14 and pick-up of economic growth momentum from third quarter of current fiscal," it said.

While the rupee was the worst-performing currency in August 2013, it became one of the best performing ones in the emerging markets in the first fortnight of September 2013, showing a 4.2 per cent appreciation against US dollar between end-August 2013 and September 13, 2013, the report said.

At present, the rupee is hovering around the 62/USD level.