ICICI Bank says Indian rupee won’t have a strong start till 2022

,INR B Prasanna, group head of global markets sales, trading and research at ICICI Bank Ltd, said in an interview with Bloomberg TV on Wednesday, “Will appreciate in the short term, but have no option but to depreciate in the long term.” “The trade deficit and the current account deficit are likely to widen further as India has seen significantly higher growth. The dollar is strength due to monetary policy divergence, and higher oil prices will also favor INR depreciation in the longer term.”

Prasanna identified large Indian companies issuing dollar bonds as well as influx of foreign investors buying Indian equities as factors that were boosting the rupee at the start of the year. The currency is up 0.7% in 2022, the highest among emerging-market Asian peers. According to CDSL data, Reliance Industries Ltd raised $4 billion in dollar bonds, while global investors have bought local shares worth $391 million so far in January.

According to Prasanna, central bank intervention is likely to halt the recent movement of the rupee. “They will look at the export competitiveness logic and the real effective exchange rate, where the INR is still higher,” he said.

Here are more of Prasanna’s comments:

• Supporting growth will continue to be an important narrative for the RBI, but at the same time they are balancing it with concerns over inflation as high frequency indicators have been positive, and GDP growth could reach 8-8.5% this year. Is.
• Omicron may prompt India to roll back aggressive fiscal consolidation plans in February budget; The fiscal deficit target is expected to be 6.3% and the government will be largely growth supportive next year as well.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.