Rupee seen stable in short-term

The rupee ended slightly easier on Friday at 46.1075/1150 per dollar, some 5.5 per cent weaker than at the start of the year, but firmer than its record low of 46.41 on September 20.

Moses Harding, treasury head at Centurion Bank, said there was no reason for any further fall in the currency this year. "There is liquidity in the market. I see the rupee stable at 46.20 to 46.50 till December," he said.

Harding said the Reserve Bank of India (RBI) would endeavour to prevent undue volatility in the currency market over the next three months to ensure that the government’s bond issues were not affected. "October to December is a very crucial period. It (RBI) wants to complete its borrowing plans in this period," he said.

Adani said the currency market had already discounted high global crude oil prices, one of the primary factors behind the rupee’s slide against the dollar this year. The Indian currency has also been under pressure due to a slowdown in foreign fund inflows. "Crude prices have come down and the market has already taken into account the increase in global prices," he said.

Export pick-up to support rupee: The beginning of the country’s export season from October and an overseas foreign currency deposit issue by the State Bank of India (SBI), the country’s largest commercial bank, will improve dollar liquidity, analysts said.

"Exports are going to be strong now and the trade gap is not going to be very huge which is a positive news for the rupee," Ashish Pitale, from JP Morgan said.

India’s exports have been strong so far in the current financial year, clocking up a 23.7 per cent year-on-year increase to $17.4 billion in the five months to August. Imports rose 20.51 percent in the same period to $ 21.74 billion, driven mainly by an increase of more than 90 per cent in the oil import bill.

Dollar supply would also be boosted by SBI’s deposit issue, aimed at expatriate Indians, which could bring in around $ 3.0 billion by the end of October, Adani said. SBI expects the issue, likely to take place by the third week of October, to raise at least $2 billion but there is speculation it may raise twice as much.

The central bank encouraged SBI to come out with the issue to bolster India’s foreign currency reserves and help meet a swelling oil import bill. Traders said they did not expect the recent volatility in India’s currency market to have much impact on the country’s trade.

"The international prices of most of the main commodities we are importing or exporting have dropped in line with the fall in our currency, so there is no major impact," one Ahmedabad-based trader said. "Edible oil prices have come down and gold is trading at lower levels."