MUMBAI: The rupee may fall to fresh record lows beyond 52 per dollar in coming months, but is expected to steady by mid-2009 and recover to 50 by the end of September, a poll showed. The partially convertible rupee has slumped to life lows as buyers desert it due to a falling stock market, foreign fund outflows and a deteriorating economic outlook as Asian exports collapse and domestic demand weakens. The currency hit a record low of 52 on Monday, taking its losses so far in 2009 to more than 6 percent after falling 19.1 percent in 2008. By 0830 GMT on Tuesday, it was trading at 51.72/73 per dollar. The median forecast was for it to be at 51.25 per dollar by mid-2009, firming back to 50 by end-September. Only three of the 10 economists polled by Reuters see the rupee falling to new lows by the end of June, and only two see it weaker than 52 by end-September. "We expect the rupee to recover from current levels due to a lower trade deficit and improving capital flows, especially from foreign direct investments and non-resident Indian remittances," said Shubhada Rao, chief economist at Yes Bank. India's exports fell in annual terms for a fourth straight month in January as the global slowdown slashed demand for Asian goods, although the value of imports have also fallen sharply as commodity and energy prices drop. January's trade deficit narrowed to $6.1 billion from $7.6 billion in December as imports dropped 18.2 percent. Foreign flows have been a key driver of the rupee in recent years. Foreign funds sold a net $1.7 billon worth of shares in the first two months of 2009 as the global economic outlooked soured, after selling more than $13 billion in 2008. In 2007, when the rupee rallied more than 12 percent, inflows were a record net $17.4 billion. Analysts expecting further losses for the rupee said the extent of the economic slowdown will be key to currency moves. The government estimates growth will slow to a six-year low of 7.1 percent in its 2008/09 fiscal year ending this month, and cool further in 2009/10, after three years of growth at or above 9 percent. But many economists believe those forecasts are too optimistic, especially if global economic conditions continue to deteriorate. "Our growth forecast is much lower than what the market is expecting. Our GDP forecast for next year is 4 percent, and so that has a profound impact on the capital flows into the stock market," said Sailesh Jha, Singapore-based senior regional economist at Barclays Capital.

Source