May 10, 2021
Will help the Reserve Bank of India in inflation management, says Ecowrap
The large supply of dollars will ensure that rupee will appreciate from the current levels, and this could potentially play to the advantage of the Reserve Bank of India (RBI) in inflation management, according to State Bank of India’s economic research report Ecowrap.
“The good thing is that given the prospects of higher domestic inflation, as supply disruptions mount, it is not doing any harm for the RBI to lean with the wind and let rupee appreciate as it is reducing imported inflation when metal prices are rising, and clearing the liquidity overhang to some extent,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.
Rupee appreciates on expectations of weak dollar, global risk sentiment
May 10, 2021
The rupee could see an appreciating bias on expectations of a weak dollar and global risk sentiment, channelising the greenback towards high-yielding assets and keeping domestic financial markets supported, say experts.
The domestic unit has appreciated about 60 paise
vis-a-vis the dollar so far this month. It has strengthened from 73.95 per dollar on May 3 to 73.355 on May 10.
Abhishek Goenka, Founder and CEO, IFA Global, observed that the dollar got hammered after the US April jobs data missed expectations by a huge margin on Friday.
The US headline non-farm payroll came in at 2,66,000 against expectations of 10,00,000. “The weak data print would cause the markets to align with the Fed communication of extremely gradual withdrawal of accommodation. The dollar has weakened across the board.
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The bank says the SA Reserve Bank has no pressure to tighten its monetary policy.
But the record-low interest rates are still not boosting banks lending activities.
Absa expects interest rates to remain at current record lows at least for the next 12 months.
Absa, which presented its economic outlook for the second quarter on Wednesday, said the SA Reserve Bank (SARB) has no reason to hike interest rates since there are no inflationary pressures and no pressing fiscal risks.
Absa Group senior economist Peter Worthington said he didn t foresee a repo rate hike until March 2022. The banking group forecasts a 25 basis points hike then, and the prime lending rate to remain below 2019 levels by the end of 2023 at 8.25%.