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MUMBAI: The rupee is likely to come under further pressure because of the risk-off sentiment in world markets due to the crisis in Credit Suisse. The domestic currency closed at 82. 61 in the interbank foreign exchange market on Wednesday, but edged lower towards 82. 79 in postmarket transactions.
Bankers say that the Indian banking system is unlikely to face any direct impact of the troubles with Credit Suisse as problems have been brewing in the banking group for some time. Bankers also said that Credit Suisse’s problems were not linked to the Silicon Valley Bank crisis and many felt that the bank would be bailed out by the authorities in Europe.
Government sources too said that a crisis in Credit Suisse would not impact India as the problem with the bank was largely limited to its home market in Europe and it had a small wholesale presence in India.
“The uncertainty in the market will persist until March 22 when the US Fed will meet to decide on interest rates. The best case situation for India would be the Fed deciding to pause due to an economic slowdown. Softer crude prices and a Fed pause would encourage the RBI’s monetary policy committee to pause as well,” said DBS Bank head of treasury Ashhish Vaidya.
However, dealers say that the market turmoil in Europe and the US would likely spread to Indian equities and this would put further pressure on the rupee. “There is likely to be outflow from foreign institutional investors if there is a risk-off sentiment, which will put pressure on the exchange rate. There are wild fluctuations in the yield on US treasuries, which is not good for financial markets,” said United Consultants managing partner K N Dey.
IFA Global said in a research note, “The rupee was trading with a weakening bias throughout the session due to dollar demand from importers and foreign banks. ”
Bankers say that the Indian banking system is unlikely to face any direct impact of the troubles with Credit Suisse as problems have been brewing in the banking group for some time. Bankers also said that Credit Suisse’s problems were not linked to the Silicon Valley Bank crisis and many felt that the bank would be bailed out by the authorities in Europe.
Government sources too said that a crisis in Credit Suisse would not impact India as the problem with the bank was largely limited to its home market in Europe and it had a small wholesale presence in India.
“The uncertainty in the market will persist until March 22 when the US Fed will meet to decide on interest rates. The best case situation for India would be the Fed deciding to pause due to an economic slowdown. Softer crude prices and a Fed pause would encourage the RBI’s monetary policy committee to pause as well,” said DBS Bank head of treasury Ashhish Vaidya.
However, dealers say that the market turmoil in Europe and the US would likely spread to Indian equities and this would put further pressure on the rupee. “There is likely to be outflow from foreign institutional investors if there is a risk-off sentiment, which will put pressure on the exchange rate. There are wild fluctuations in the yield on US treasuries, which is not good for financial markets,” said United Consultants managing partner K N Dey.
IFA Global said in a research note, “The rupee was trading with a weakening bias throughout the session due to dollar demand from importers and foreign banks. ”
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