Rupee seen at 42.50 per US Dollar by end 2008: HSBC

The rupee may rise to 42.50 per dollar by the end of 2008 as the Reserve Bank of India's determination to cap the local unit's weakness was broadly in line with its policy stance and supported its efforts to fight inflation, HSBC said in a recent note.

HSBC estimated the Reserve Bank of India (RBI) unwound about $4.5 billion of forex reserves in June to curb the rupee's fall.

"Though the scale of intervention to ameliorate the weakening currency is unprecedented, this intervention policy is likely to be sustainable at least in the coming months," HSBC said.

India's foreign exchange reserves fell to $308.397 billion in early July from $315.660 billion at the beginning of June.

But HSBC warned that near-term fundamentals still did not favour the rupee, with recent political developments adding to adverse factors.

A median of a poll of 12 traders and economists earlier this month showed the rupee would be at 43 per dollar by the end of December, pressured down by record high oil prices and outflows of foreign funds from the stock market.

HSBC was not part of that poll. At 1:07 p.m., the partially convertible rupee was at 42.83/84 per dollar, stronger than its previous close of 43.87/88. It hit a 15-month low of 43.50 earlier this month.