New Delhi: The appreciation in the US dollar notwithstanding, the rupee is expected to trade in the 58-62 range supported by softening of global oil prices and curbs on gold imports, says a Bank of America Merrill Lynch report.
The rupee was today was trading at around 60.24/dollar after earlier hitting a near 5-week high of 60.21.
The global brokerage firm further said that the Reserve Bank of India would need to raise $40 billion by March 2016, just to maintain import cover at the present eight months.
It said the factors that are supporting the Indian rupee include softening of oil prices, the continuation of gold import curbs and rising FII equity inflows.
"We expect the RBI to hold Rs. 58-62/USD for now even though the US Dollar has strengthened below 1.30/Euro," BofA-ML said in a research note, adding that rising FII equity inflows at $9.6 billion so far this fiscal has also led to a helping hand to the rupee.
"We continue to expect RBI Governor Raghuram Rajan to buy FX at Rs. 58+/USD to guard against contagion," the report noted.
Dr Rajan has also said that RBI is preparing for any rate hikes by the US Federal Reserve by building an adequate level of foreign exchange.
"Any emerging market today is going to look at the currency volatility and say 'whatever money comes in, I'm going to be careful about it, I'm going to build some reserves..," he had said in Chicago last week.
According to the BofA-ML report, restrictions on gold imports is expected to contain the current account deficit at 1.7 per cent of GDP in FY15.
The rupee would price in the eventual liberalisation of gold imports and this in turn would push up the current account deficit to 2.4 per cent of GDP in FY16, especially if pent up demand leads to a jump in gold imports, it added.
According to BofA-ML gold price is expected to be at $1375/oz in 2015.
