Standard Chartered optimistic Rupee will appreciate in Q3-4

Standard Chartered Bank has expressed optimism that the over the medium term the Rupee will appreciate owing to a host of factors.

"We are optimistic on the LKR over the medium term and expect sustained appreciation from late Q3-Q4 onwards. Key to this view are the disbursement of the final USD 430mn tranche of the SBA facility, the upcoming sovereign bond issuance and reports that further IMF funding in the form of a USD 500mn security arrangement is likely upon the completion of the SBA," Standard Chartered Bank said.

"Together, these should return Sri Lanka’s BoP to a USD 0.9bn surplus in 2012 from a USD 1.06bn deficit in 2011," it added.

It also said risks appear quite balanced for the Rupee into quarter-end and a pullback towards the Bank’s Q2-end target of 128 cannot be ruled out in the coming days, especially if import demand remains muted. Also, the substantial depreciation in the currency year-to-date is likely to provide a floor below exports at some point, thereby leading to a narrower trade deficit.