US subprime woes to last for 9 more mths

The US sub-prime crisis could last another 6-9 months following which the growth in the US economy could pick up, said Anjan Barua, chief general manager (treasury), State Bank of India.

"The dollar's weakness because of the sub-prime crisis could help its exports and, in turn, the overall U.S. economy," he said here Saturday at a meeting organized by the Foreign Exchange Dealers' Association of India.

Since the past month, the dollar has been touching multi-year lows against major currencies because worries of recession are looming over the US economy.

The greenback touched a record low of $1.4730 to the euro earlier this month.

A recovery in the health of the US economy could prevent investors from pulling out investments from the U.S. economy and into Asian and emerging market economies, he said.

As a result, Barua expects the scorching growth in India and China to "taper off".

Barua sees Africa as the next upcoming developing economy after India and China. When asked about the rupee movement in the near-term, Barua said there could be a correction in the rupee from here on.

"If you notice for the past few days, even when the stock markets have been rising, rupee has not shown much appreciation," he said.

"This is because probably foreign funds are not converting their investments into rupees, they are just re-investing their money into the stock markets."

Talking about the yet-to-be-launched rupee futures market, Barua said that the volumes will pick up well.

Friday, a committee set up by the RBI recommended allowing futures trading in dollar/rupee.

But it proposed to keep the market out of bounds for foreign funds initially.

Barua expects the rupee futures market to start business by the next financial year.