India Rupee to Fall on Current-Account Gap, Brown Brothers Says

By Anoop Agrawal

July 16 (Bloomberg) -- India's rupee is likely to weaken 1.8 percent against the dollar by the end of the year as costlier fuel and food imports cause the current-account deficit to widen, according to Brown Brothers Harriman & Co.

The rupee slumped 7.5 percent in the past three months, the second-worst performance among the 10 most-traded currencies in Asia excluding Japan, and touched a 15-month low of 43.4750 per dollar on July 1, according to data compiled by Bloomberg. It closed at 43.235 yesterday in Mumbai and Win Thin, senior currency strategist at Brown Brothers Harriman, forecasts the rupee will be 43.5 by Sept. 30 and 44 by Dec. 31.

``The current-account position is weak and still vulnerable because of the high commodity prices,'' New York-based Thin said in an interview. ``The present level of the deficit is enough to keep the currency under pressure in the rest of the year.''

India's current-account deficit, which includes trade and investment flows, widened to a record $17.4 billion in the financial year ended March 31, from $9.8 billion in the previous 12 months, as the cost of crude oil jumped 54 percent. Since then the price of crude in New York has surged a further 37 percent to $138.88 a barrel, boosting the fuel bill of a nation that imports about three-quarters of the oil it consumes.

Thin predicts the current-account deficit will widen to as much as 4 percent of India's gross domestic product this year. The value of the goods and services produced in India reached $1.07 trillion in the last financial year.

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.