Less dovish Fed is good for India: BofA-ML

Fri Jan 4, 2013 4:07pm IST

The Federal Reserve Building is seen in Washington September 16, 2008. REUTERS/Jim Young/Files

The Federal Reserve Building is seen in Washington September 16, 2008.

Credit: Reuters/Jim Young/Files

Related Topics

Reuters Market Eye - Bank of America-Merrill Lynch says a less dovish U.S. Federal Reserve is good for India. The report comes after Fed officials are increasingly concerned about the potential risks of the U.S. central bank's asset purchases on financial markets.

India would benefit should the Fed turn less dovish by lowering "imported" inflation, reducing prices of oil and hence, helping narrow the current account and fiscal deficits, and sustain capital inflows by reducing macro risks.

A move towards ending quantitative easing would ultimately help the Reserve Bank of India recoup forex reserves sold and shore up import cover, which stands at seven months, BofA-ML says.

The bank expects the rupee to trade weak until the RBI recoups forex reserves at a time of wide current account deficit. * RBI should buy FX at 52/dollar levels, if the dollar settles at 1.30/euro to recoup $65 billion reserves sold since 2008, says a note.

RBI will likely continue to defend 56/dollar levels, if the dollar rises towards 1.20/euro, it says.

(Reporting by Subhadip Sircar)

FILED UNDER:

"India's Daughter"

Reuters Showcase

Microfinance

Microfinance

Funding the unfunded: India helps small business borrow to grow  Full Article 

Insurance Sector

Insurance Sector

UK healthcare firm Bupa sees strong growth in India  Full Article 

Sensex Rises

Sensex Rises

Sensex edges up; consumer and healthcare stocks rise  Full Article 

Market Eye

Market Eye

FTSE adds nine Indian firms as large-caps in Asia-Pacific ex-Japan index   Full Article 

Indian Ocean Diplomacy

Indian Ocean Diplomacy

PM Modi to ramp up help for Indian Ocean nations to counter China influence  Full Article 

ECB Bond-Buying

ECB Bond-Buying

ECB raises growth forecasts, to start printing money next week  Full Article 

China Economy

China Economy

China signals "new normal" with lower annual growth target  Full Article 

Pharma Sector

Pharma Sector

Panel recommends waiving late-stage trials for some drugs  Full Article 

E-commerce

E-commerce

China backs e-commerce expansion in win for Alibaba, JD.com  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage