Rupee may be on a roller-coaster ride in 2013

Updated: Monday, December 31, 2012, 9:20 [IST]

In 2012, staggering dollar inflows from foreign funds kept the rupee virtually afloat. In fact, FII inflows crossed the Rs 1 lakh crore mark in early December itself, helping to sustain the rupee through the year.

To a large extent, that trend needs to continue, given that dollar inflows through exports and FDI has been poor. On the other hand, imports, particularly of oil have been rising, putting pressure on the trade deficit and hence the current account deficit and the rupee.

A lot of the momentum for the rupee would come also from reform measures. A slew of reform measures initiated in September 2012 saw the rupee recovering only to fall again in December to the 55 levels.

It's still way above the 57.30 levels reached in 2012, but, the rupee has witnessed erratic bouts and one cannot rule out the currency falling to those 57 levels sometime during 2013.

If the government's reforms initiative start faltering one can most certainly witness a fall in the rupee. One does hope and pray that the country's sovereign rating does not get downgraded in 2013, which would be a disaster for the rupee.

It's going to be a tough year for the rupee from an international perspective as well given that things are not looking too good globally at the moment. The rupee would also react to international events like a fiscal cliff in the US or a Greece exit from the EU region.

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