Rupee top perfomer among Asian currencies

Indian Rupee is the top outperformer among the Asian currencies, Japanese brokerage firm Nomura said on Tuesday.

Craig Chan, head of Asia FX research at Nomura, listed Rupee, Indonesia's Rupiah and Malaysia's Ringgit with scope to outperform among Asian currencies from now till end of this year, supported by strong macro fundamentals.

"From the macro side, these three currencies are supported by some of the strongest fundamentals," said Chan during a media briefing at the annual Nomura Investment Asia Forum 2016 being held here from June 7-9.

India has a basic balance surplus.

Current account deficit plus net Foreign Direct Investment provides surplus, according to Chan.

The Rupee is 3.7 per cent undervalued on trade related basis, he pointed out.

All three currencies are under-valued and have adequate reserves support, Chan said.

"These three countries have reserves and currencies definitely have scope to outperform in the region," he said.

Chan also observed that there has been "no strong evidence thus far that these countries' central banks have been buying dollars aggressively and accumulating reserves."

Meanwhile, Nomura welcomed the RBI's decision to keep the repo rate unchanged at 6.5 per cent.

Nomura said, "The RBI's policy stance remains accommodative with a focus on implementing its revised liquidity management framework, under which it plans to gradually improve banking system liquidity from a deficit to neutral over time.

"Despite the RBI's accommodative policy stance, we expect rates to remain unchanged until end 2016, as we do not see CPI inflation undershooting the RBI's 5 per cent target, which leaves no scope for further rate cuts."

"In our view, the focus of monetary policy for the rest of the year will be on increasing liquidity to improve the transmission of rate cuts that were already delivered," said Nomura.