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RBI Financial Stability Report: Brief on INR Forex Market

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Date: 30th Dec 2013

Today RBI released Financial Stability Report of December 2013, with a view on Fed tapering, improving economic conditions and Bond Purchase Program from 2014.

Highlights of RBI Governor Rajan speech after FSR Release:

  • Economic conditions are improving, but growth is still weak.
  • Fed tapering effect may be for short term in Forex market
  • Indian elections has increased uncertainty in the market
  • Growth is dependent on Global uncertainty, Current Account deficit and Inflation rate.


However, RBI is concerned about the banking sector wherein losses have occurred in Banks after the FSR Report published in June 2013. RBI may focus on Inflation data, as no change in Interest rate this month has surprised the market.The delay in tapering may help RBI to adjust gap in Current account deficit. We have next Policy meeting on 28th January 2014 and focus may remain on Inflation rate.

We have CPI data on 13th and WPI data on 14th January, which is important for RBI and Market. However, the effects of Fed tapering on Rupee may remain as the focal point.

Rupee was seen range bound last week; movement of 35-39 paisa was seen. We may see Rupee weak against Dollar on account of Fed tapering. But, overall we expect Rupee would be in the range of 60.90 - 62.70 till 13 Jan 2014(Inflation Data). RBI may take necessary steps if Rupee crosses 63 mark.


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