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Rupee will come under pressure: I-Sec study

The Indian rupee could again come under pressure with improving liquidity in the domestic money markets and a deteriorating global situation, says a weekly report issued by the ICICI Securities and Finance Company.

Given the recent volatility in foreign exchange markets, the report says the Reserve Bank of India is likely to keep a close watch to prevent the excessive liquidity from flowing into currency markets.

Most emerging countries are under pressure following the Russian crisis and Canada has become the first developed market to be affected.

The export refinance rate at 7 per cent and repo rate at 8 per cent provides a clear arbitrage to banks with an export portfolio.

However, the export financing rate at 9 per cent justifies the refinance rate with a spread of 2 per cent.

The anticipated hardening the call money rates following one percentage cut in Cash Reserve Ratio that was effective from last Saturday, did not come true as the traditional borrowers had already covered a significant part of their requirement through the term money market and the call is now hovering at a normal range of 8 to 10 per cent.

UNI