Fri, May 16 04:33 PM
MUMBAI (Reuters) - The Indian rupee may fall by 5-7 percent against the U.S. dollar by end-2008 dragged by a slew of factors such as a widening trade deficit, and soaring oil and commodity prices, Morgan Stanley said in a note on Friday.
* The partially convertible rupee has fallen more than 8 percent in 2008 and is the worst performing currency after the Korean won and the Pakistani rupee. At 3:56 p.m. it was changing hands 42.65/66 per dollar, after logging a 13-month low of 42.92 earlier.
* The rupee has gained versus the dollar by 22.8 percent as of April 23, 2008 and in the same period the dollar fell against the euro by 42 percent. The reversal of this trend is now underway, Chetan Ahya, Tanvee Gupta and Sumeet Kariwala said.
* On a trailing 4-quarter basis, the current account deficit, excluding remittances, and trade deficit remain high at around 4.5 percent and 7.2 percent of GDP, respectively.
* Higher oil prices will likely add further to the trade deficit. A $10 increase per barrel in crude prices on an annual average inflates the trade and current account deficits by $7 billion, they wrote in the note.
* According to Morgan Stanley, risk aversion in global equity markets could result in a slowdown in capital inflows. About 80 percent of the total capital inflows into India tend to be the less stable non-FDI inflows.
(Reporting by Saikat Chatterjee)
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