Tags: Piron | Rupee | India | shine

FX Expert: The Lowly Rupee Is About to Shine

By John Morgan   |   Friday, 30 Nov 2012 01:13 PM

The downtrodden Indian rupee is destined for a turnaround and may be one of the world’s top-performing currencies in 2013, according to Claudio Piron, head of Asia ex-Japan fixed income and forex strategy at Bank of America-Merrill Lynch.

The currency should rise 10 percent against the dollar next year on account of easier monetary policy and economic reforms in India, Bank of America-Merrill Lynch predicted.

“We are in low global growth, excess liquidity environment, where capital flows will drive the appreciation,” Piron told CNBC. “[The rupee] could be one of the world’s best-performing currencies next year.”

Editor's Note:
'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

Piron predicted growth in India to increase to 6.5 percent in 2013 from about 5.5 percent this year, while also forecasting a slowdown in inflation.

Earlier this year, India launched a range of investor-friendly initiatives such as opening the retail and aviation sectors to foreign investment, CNBC said.

However, Justin Harper, a strategist at IG markets, was not as optimistic.

“If you’ve had two bad years, there’s no reason they can’t have three bad years,” Harper said in reference to the fact the rupee declined 19 percent in 2011 and will probably end this year lower again.

Over the past 10 years, no Asian currency has experienced two consecutive years of losses, CNBC noted.

Meanwhile, the long business slump in India is adding urgency to political efforts to add more economic reforms, according Reuters. New government figures this week showed capital formation at 33.8 percent of gross domestic product, its highest level for at least two years.

Most economists expect the business-friendly measures to spur investment and for the Indian economy to slowly recover next year.

“We are getting close to the bottom, although we are most likely talking about a ‘bathtub shaped‘ recovery with some bottom scraping in coming quarters,” HSBC Global research said in a note obtained by Reuters.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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