Mumbai: The rupee will slide to Rs70 to a dollar level if portfolio flows do not revive by December, and this may lead the government to raise money by selling bonds to the diaspora again, a report said on Monday.

If the foreign portfolio investment flows do not revive by December, the rupee will depreciate further to over Rs70 to a dollar, analysts at Bank of America Merill Lynch said in a note. Such an eventuality may lead the government to look at getting foreign inflows through the NRI bonds, which has been done thrice earlier, it said.

“The trigger for actual issue will likely be delay in revival of FPI flows till, say, December driving the rupee beyond Rs70 per USD," it said. It can be noted that the rupee had breached the lifetime high and crossed the Rs69 to a dollar level last week. However, it has gained in the last few trading sessions and opened at 68.33 on Monday.

Analysts at the American brokerage said ministry of finance “talked up" the rupee and also welcomed the North Block decision to consider NRI bonds to support the rupee. The RBI will have to sell $20 billion from the $407 billion in order to ensure that the current account gap comes within the brokerage’s target of 2.4% of the GDP, the note said.

It can be noted that in the last few weeks, the reserves have also been declining, suggesting interventions to avoid volatility. The total forex reserves had touched a lifetime high of $426 billion in April this year.

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