Less dovish Fed is good for India: BofA-ML
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)
- Tweet this
- Share this
- Digg this
Finance Minister Arun Jaitley favours a cut in interest rates to trigger demand in the construction sector, a newspaper report said on Saturday, but the Reserve Bank of India (RBI) has signalled it will not ease policy until it is confident of lower inflation. Full Article
Euro zone risks "relapse into recession" without structural reforms - Draghi. Full Article
Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw” Full Article