Indian rupee to drop to 56/dlr in 3 mths-Barclays

MUMBAI, March 2 (Reuters) - The Indian rupee could drop to a record 56 against the dollar in the next three months, weighed by a slowdown in the economy and a balance of payments deficit, Barclays Capital said in a note on Monday.

* The Indian economy will expand at 4 percent in the next financial year, which will weaken the real effective exchange rate (REER) of the rupee, or its value compared with a basket of currencies of its key trading partners.

* Indian economy has been growing at 9 percent or higher in the last three years and the government expects it to expand at 7.1 percent in the current fiscal year, with many private economists, predicting it to be much lower.

* India's economic growth slowed much more than expected in the December quarter, slumping to its weakest pace in almost six years and raising expectations the central bank would cut rates soon. See [ID:nDEL140392].

* The economy in the December quarter grew by 5.3 percent from a year earlier, below forecasts of 6.2 percent and the previous quarter's growth of 7.6 percent.

* "With further risks of depreciation of emerging market currencies and a resilient dollar environment in the next few months, we believe global factors are negative for the outlook of rupee," Shailesh Jha, senior regional economist, said. (Reporting by Swati Bhat; Editing by Ramya Venugopal)

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Source: Reuters