Investors Betting On Two More Rate Hikes By RBI This YearRitesh Jain
India – Reuters says that investors are betting that India will need to raise rates at least two more times this year to shore up the rupee, which is presently trading at 72.58 to the dollar. The government’s latest measures to support the currency have been underwhelming, leading to increased pressure on the currency. Rate hikes “will be far more effective to bring down the premium investors are demanding from India” according to JP Morgan. The current account deficit is 1.88% of GDP, up from an average last year of 1.22%, while the trade deficit has blown out to USD174bn in August and traders believe its FX intervention increased this month to defend the 73 level.
A second article says India’s steel ministry has proposed increasing the import tariff on steel products to 15% from the current range of 5% to 12.596 to try to protect the currency according to 2 sources and a government document. The proposal is part of a broader government plan to cut “non-necessary” imports to stop the outflow of dollars that has sent the rupee to record lows, that will be discussed in the trade ministry today.
Article by Ritesh Jain, World Out Of Whack