Weakness in rupee likely to persist: Macquarie

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Indian rupee, which breached the Rs 48 per US dollar mark to a 2-year low in the intra-day trade on Wednesday, is likely to remain under pressure in the near term and will be around Rs 47/USD by the end of this year, global research firm Macquarie said.

"We expect the rupee to remain weak in the near term if the trade-weighted US dollar continues to rise. We expect the rupee to remain in the range of 46.5-47 through end-December 2011," Macquarie said in a research note.

Since August, the rupee has been the worst performing currency in the Asia, excluding Japan region, as it has moved from 44.1 to 47.8. The trade weighted US dollar has appreciated 3.5 per cent during the period.

The rupee tumbled to nearly two-year low of Rs 48.01 per US dollar in early trade on Wednesday on persistent demand for the American currency from banks and importers. The dollar has been firming in overseas markets as well.

Today, the rupee fell 14 paise to Rs 47.78 per USD in early trade, extending losses for the ninth straight session on strong demand for the dollar from importers and banks.

Notwithstanding the fact that the depreciation in the rupee is good for exporters, Macquarie said, "In the event of high global commodity prices it would likely result in policy rates remaining higher for longer."

The rupee has depreciated by 8.5 per cent against the dollar since August, compared to the Korean won's depreciation of 5.1 per cent, the Malaysian ringgit's 4.8 per cent drop and the Indonesian rupiah's 3.7 per cent fall.

Besides, factors such as a high current account deficit, high trade deficit, slowdown in capital flows and high crude prices, the global uncertainty is also weighing on the rupee, Macquarie said.

"The evolving euro-zone debt concerns have increased the uncertainty in the currency market," Macquarie said, as the rupee has depreciated by 4.1 per cent against the USD but appreciated 0.4 per cent against the Euro.

Rupee is likely to remain under pressures in the near term largely owing to the fact that India runs a high current account deficit of 2.6 per cent of GDP, and high trade deficit of 7.6 per cent of GDP as of FY'11, Macquarie said.

Besides, any major risk aversion in global equity markets can result in a slowdown in capital flows and India, which imports around 80 per cent of its oil requirement, is likely to see a further widening of the current account deficit because of high oil prices, Macquarie added.