Wednesday July 23, 07:52 AM
ANALYSTS' VIEW - Government wins confidence vote |
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SINGAPORE (Reuters) - Prime Minister Manmohan Singh's government won a vote of confidence in parliament on Tuesday, ensuring the immediate survival of the ruling coalition and a civilian nuclear deal with the United States.
The government won 275 votes against 256 for the opposition.
Here are selected views from analysts and research notes from regional economists regarding the implications of the vote.
SEAN CALLOW, SENIOR CURRENCY STRATEGIST AT WESTPAC BANKING CORPORATION
"Is the worst over for the Indian rupee? Probably - we doubt there are enough long rupee positions to produce a repeat of the May U.S. dollar/rupee squeeze.
"But it's still too early to expect a sustained reversal in the pair and indeed further losses are likely."
ASHLEY DAVIES, STRATEGIST AT UBS
"Given the close nature of the vote, what was at stake and what we believe was a heavily long-U.S. dollar market's positioning on the run-up to the vote, should see the Indian rupee doing well today.
"We maintain our view that the Indian rupee will benefit from an increasingly hawkish central bank that is likely to raise the repo rates again at the July 29 policy meeting.
"The rupee will gain some rates support and sentiment could also improve should WPI inflation numbers come in below consensus gain like it did last week.
"We target 42.00 for dollar/rupee for now."
TUSHAR PODDAR AND PRANJUL BHANDARI AT GOLDMAN SACHS
"We think markets will see the outcome as positive in the short term.
"Although markets were expecting the government to survive, the vote and the margin of victory removes the element of political uncertainty that has been dogging sentiment for some time, we think the outcome will also be bullish for the Indian rupee in the short term, especially if it entails more liberalisation of inflows, and the divestment of government stakes in public-sector companies.
"The latter may also help somewhat in reducing the alarming increase in the fiscal deficit.
"We would stress, however, that the fundamental drivers of macroeconomic weakness -- very high inflation, slowing growth, significantly higher interest rates, and a rising current account and fiscal deficit -- remain in place. That said, today's news on the political front is incrementally positive."
THIO CHIN LOO, CURRENCY STRATEGIST AT BNP PARIBAS, SINGAPORE
"With crude oil prices lower overnight and the government's win, dollar/rupee is likely to remain offered despite the dollar's rebound overnight. A break below 42.50 per dollar is needed to provide more thrust to the rupee towards 42.10.
"Political fireworks will remain however - the Congress has to face six state elections."
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