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Rupee seen trading at 65 to dollar by year-end: HSBC

Rupee seen trading at 65 to dollar by year-end: HSBC

The rupee faces further risks, even after recovering some lost ground, and may hover around 65 against the dollar by the end of this year, London-based banking and financial services company HSBC has said.

Risks such as "further equity outflows, higher oil prices, and a lack of policy continuity" remain for the rupee, HSBC said in a research note.

"While we have been cautious towards the rupee for some time, we still see continued headwinds for the currency. In this context, we shift our year-end dollar-rupee forecast higher to 65 from 61 and see extended weakness into next year," it said.

The rupee settled at 63.49 against dollar on Friday, gaining for a second consecutive week.

The local currency had depreciated to an all-time low of 68.85 on August 28 from 54.99 on December 31.

After the rupee weakened sharply, "policymakers in India stepped in to try to calm the markets, which would have provided some short term relief to INR", HSBC said.

The rupee jumped 425 paise in five straight sessions starting September 4, when Raghuram Rajan took over as RBI Governor and announced steps to rescue the battered financial markets.

HSBC said the rupee can potentially weaken further as a result of "further upside economic data surprises in the US or Eurozone relative to Asia".

The bank further said that geopolitical risks - particularly in West Asia - are also prevalent for the rupee.

"If tensions rise and push oil prices higher, then the rupee would be seen as more vulnerable given the strain that could impact India's trade deficit given the high oil price," HSBC said.

Prime Minister's Economic Advisory Council Chairman C Rangarajan on Friday said the rupee at the current level is "well corrected" and stability is returning to the foreign exchange market. He said as capital flows return and as the current account deficit begins to fall, this tendency will strengthen.