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Mumbai: Goldman Sachs Group Inc. revised its forecasts for the Indian rupee, predicting a 3.2 per cent drop in the next six months because rising oil costs will increase the import bill and double the nation's current-account deficit.
The broad measure of trade that includes investment flows will widen to 3.5 per cent of gross domestic product in the fiscal year ending in March, from 1.5 per cent the previous year, Tushar Poddar and Pranjul Bhandari wrote in a note to clients. Goldman differs from all the other 21 economists surveyed by Bloomberg News who forecast a stronger rupee by year-end.
Dollar impact
"The recent large move up in the dollar has caught us by surprise and appears to be driven by the run-up in oil prices," wrote Mumbai-based Poddar and Bhandari, analysts at the world's largest securities firm by market value. "The rupee will continue to weaken."
The rupee traded at 42.73 per dollar in Mumbai on Friday. Goldman changed its three-month, six-month and one-year forecasts for the rupee to 43.9, 44.1 and 42.2 from earlier estimates of 41, 40.3 and 38.9, respectively. The median forecast of analysts is for 40.5 at the end of June, 40.32 at the end of September and 39.5 at the end of 2008.
The rupee has declined eight per cent this year, making it the second-worst performer among the 10 most-traded Asian currencies excluding the yen.
The rupee will also drop as overseas funds cut holdings of the nation's assets, said the Goldman analysts.
India's current-account shortfall widened to $5.4 billion in the three months ended on December 31.
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