Mecklai Financial, the leading treasury risk consulting and forex risk advisory company in India has given `post budget currency outlook`.  The same is as under:

The currency appreciated for four consecutive sessions after Finance Minister on February 26 unveiled a budget proposal to help shrink the deficit to 5.5% of gross domestic product (GDP) in the fiscal year starting April 1 from a 16-year high of 6.9% in the current financial year. The government plans to improve its finances by raising more money from sales of state assets, according to Mukherjee.

The rupee has sustained a positive bias since the budget unveiled plans to cut the fiscal deficit and boost revenues from privatization. The rupee strengthened to 45.75 a dollar from a level of 46.87 registered two weeks before. The currency appreciated 1.6% this year, the second-best performance among the 10 most-active Asian currencies outside of Japan.

The South Asian nation plans to raise as much as Rs 400 billion from the sale of shares in state- owned companies in the next fiscal year, from an estimated Rs 250 billion in the 12 months ending March 31, which would attract inflows into India helping rupee to appreciate further. However, as mentioned earlier, Dollar Index would be the main factor driving Rupee`s direction. Dollar gained in the past fortnight on the back of concerns about the fiscal health of peripheral European countries.

Though the currency had received some support from reports of a rescue package from Germany, it pared gains after a German Finance Ministry spokesman stated that the country had not made a decision for Greece on this regard. The currency again came under pressure after Fitch downgraded Greece`s four largest banks. S&P`s reports of a downgrade possibility of Greece`s credit rating one to two notches within a month further weighed on the currency. However, Greece has presented some austerity measures meant to raise around USD 6.6 billion and has also gone ahead with the sale of 10 year bonds helping Euro to recover a bit before the D-Day i.e. 16th March, the day on which European Nations will decide the rescue package for Greece along with conditions.

China`s unexpected move to raise banking reserves requirement by 50 bps for the second time in this year also kept investors cautious thereby supporting Dollar. The Dollar index further buoyed with the Fed increasing the discount rate by 25 bps last week.

However, Bernanke`s reiteration that the Fed will keep interest rates low for an extended period stalled the USD rally that started on the back of the Fed`s increase in the discount rate. More over the greenback is also expected to remain firm ahead of the FOMC rate decision on March 17.

Mecklai Financial expects USD/INR to trade in a range of 44 - 48 with a strengthening bias in a period of six months from now on subject to a monthly review depending upon the various global factors evolving from time to time.