Currency volatility will continue to affect Asian units as both global and local factors will exert pressure in 2015, but the rupee will be comparatively better off in the region, says HSBC.
Pegging the rupee at 62.5 to 63 to the US dollar next year, the leading brokerage said the domestic unit should only drift higher on the back of the fast weakening current account strains, PTI reported.
"Lower oil prices should mean a persistent improvement in the current account and inflation. The RBI is committed to lowering inflation expectations and now has the ability to curb excessive rupee weakness," HSBC's head of Asian forex research Paul Mackel said in the report.
"These factors could mean the rupee will be one of the more resilient currencies in Asia, although the RBI is wary of spot appreciation, given that its own REER measurement is showing signs of over-valuation and we see the rupee at 62.5 to 63 to the dollar in 2015," he said.
It has picked the rupee as the safest bet in the New Year amid soft growth and rising disinflationary pressures. It expects the rupee to be more resilient, as better terms of trade help bolster external balances via soft export volumes and commodity prices; and domestic growth can be supported by structural reforms and the ability to add leverage.
Inflation Rate Flat
India's wholesale inflation rate fell to a five-and-a-half-year low, driven by ongoing falls in fuel and food prices, data showed Monday, boosting hopes of an interest rate cut early next year.
The Wholesale Price Index (WPI), India's inflation measure with the biggest basket of goods, slipped to a lower-than-expected zero percent in November from a year earlier, official data showed, AFP reported.
The latest WPI compares with a five-year-low of 1.77 percent recorded in October, and was below analysts' estimates of about 1.1 percent.
India, which relies heavily on fuel imports, is seen as benefiting from tumbling global oil prices.
The data follows figures released on Friday which showed consumer inflation slowed to 4.38 percent, a three-year low, while industrial output contracted, putting pressure on the central bank to cut rates.
Finance Minister Arun Jaitley is hoping for a cut in borrowing costs to boost investment and stimulate the faltering economy, which is mired in the longest slowdown in a quarter century.
