US$84bil short book putting pressure on India's rupee
MUMBAI: The Indian rupee is emerging Asia's worst performer this quarter and may continue to lag peers as the central bank aims to avert a depletion in its foreign-exchange reserves, according to analysts.
The Reserve Bank of India (RBI) had dollar repayments of near record high of US$84.3bil as of March as indicated by its net short forwards position, a measure of the amount of greenback it has agreed to sell at a future date.
That may pile pressure on the RBI to buy dollars to prevent a drain on its reserves and lead to the rupee falling to 86.50 per dollar by end-December, according to IDFC First Bank Ltd.
The currency is likely to weaken to 87.50 per dollar from 85.5813 last Friday, according to estimates by Commerzbank AG.
The rupee is on track to 'underperform even as the dollar remains under pressure,' Barclays Bank Plc strategists including Mitul Kotecha wrote in a note.
The RBI is expected 'to be focused on replenishing its foreign exchange buffers while allowing its forwards book to run off.'
The RBI will likely avoid keeping a large book as it represents a large potential drain on reserves, said Gaura Sen Gupta, chief economist at IDFC First Bank.
The rupee has fallen 0.1% this quarter, missing out on a rally against the dollar that has lifted other emerging Asian currencies amid outflows from India's bond market.
RBI governor Sanjay Malhotra has been flexible in allowing the currency to transition to a market-determined trading regime.
Reserves are expected to cushion volatility in the exchange rate and build resilience to the increasing reoccurrence of geopolitical and economic shocks, the central bank in a report last week.
The RBI's short dollar book up to three months stood at about US$24bil while the three-month to one-year bucket was at US$40bil, according to central bank data. — Bloomberg
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