Reserve Bank of India not fighting rupee weakness

The weakness in rupee, which is inching closer to the 43-mark against the US dollar with a six per cent fall this fiscal, is not being resisted as strongly by RBI as during its appreciation, banking giant HSBC believes.

RBI is not stopping rupee weakness despite the continuing surge in wholesale and consumer price index-related inflation, HSBC's Chief Economist Robert Prior-Wandesforde wrote in a research note on Indian economy.

"Importantly, the impact from RBI intervention has shifted from preventing currency appreciation to reinforcing currency weakness," he said.

"Having appreciated pretty much against a soft dollar since August 2006, the tide has turned for rupee, with the Indian currency falling by more than seven per cent since its closing high in early February this year of 39.4," HSBC said.

Since a level close to Rs 40 to a dollar at the start of this fiscal, rupee has fallen about six per cent to Rs 42.5.

Market experts believe that the government and RBI are unlikely to step in strongly against the rupee weakness and they might focus more on reviving exports and support the economy. They expect the rupee to remain at the current levels in the near future, if not depreciate any further.

"We are holding our estimate that the exchange rate will be 42.50 rupees to a dollar by September end," Standard Chartered's Senior Economist Suchita Mehta told PTI.

In the long term though, the rupee is expected to resume its upward march, with HSBC forecasting that it would touch 36 rupees to a dollar by end of fiscal 2008-09 - Testing PTI Feed