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US dollar's status to be strengthened: Indian economist

(Xinhua)

22:38, November 28, 2011

MUMBAI, Nov. 28 (Xinhua) -- The status of U.S. dollar as anchor currency will be strengthened with expected weakening of Euro until March 2012, said Madan Sabnavis, chief economist with Indian credit rating company CARE Ratings on Monday.

"Euro will continue to weaken against U.S. dollar and couldn't get better until March 2012. The exchange rate of Euro against U.S. dollar will be in the range of 1.33 to 1.35 in the period," Sabnavis told Xinhua.

He said, "It's possible for Euro zone to collapse but it won't happen any time soon."

The countries heavily reliant on EU will be impacted from EU debt crisis and India is relatively insulated from the debt crisis, said the economist.

Five European governments have faded and every country in Europe was not immune to the crisis, said Sabnavis on the impact of Europe debt crisis.

Now the U.S. government is stronger though it also shouldered temporary impacts in August 2011, according to Sabnavis. He added, "I don't see any political repercussion in the U.S."

In 2012, world economy will face the same kind of risks as 2011 and what happens in EU and other countries needs to be closely monitored, warned Sabnavis.

Though not fully, the decoupling of emerging economies from developed ones is good for emerging economies, said Sabnavis.

Still the economist held that emerging economies can't be secured against risks spreading from developed economies, since the situation is driven by market forces.

It's an option for Reserve Bank of India (RBI) to intervene into the forex market to curb the depreciation of Indian rupee, he said.

Sabnavis said that south-to-south trade has huge potential and could play a role to recoup losses.

Indian rupee has depreciated around 15 percent against U.S. dollar in 2011, partially leading to persistent inflation and worsening fiscal deficit.

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