Mumbai: Fears over the rise in global trade protectionist measures, coupled with high crude oil prices are expected to exert pressure on the Indian rupee, experts said on Saturday.
However, healthy economic growth rate data released on Friday is expected to somewhat arrest any sharp decline in the rupee vale in the initial days of the coming week.
Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities said that Dollar-Rupee pair continues to be driven by the “EM turmoil, rising oil prices, trade war and a pre-election risk for India”.
“RBI intervention may continue to support rupee as it trades closer to 71 level,” Banerjee told IANS.
The RBI is known to enter the markets via intermediaries to either sell or buy US dollars to keep the rupee in a stable orbit.
“A robust growth outlook for the Indian economy should prevent a sharp decline in rupee. We expect a range of 70-71.50 on spot for next week,” Banerjee said.
According to Sajal Gupta, Head Forex and Rates, Edelweiss Securities: high crude prices can put pressure on rupee as Iran sanctions “force our oil refiners to buy from other suppliers” to whom up-front payments would be made.
“September seasonally is a appreciative month for rupee historically… rupee needs to break below key 70.20 levels to sustain any short term strength,” Gupta said.
Apart from high crude oil prices, any further outflow of foreign funds from the Indian equity and bond markets might have an adverse impact on the rupee.
In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors sold scrip worth Rs 579.20 crore during the past week.
In recent days, geo-political developments along with outflow of foreign funds have pulled the Indian rupee to fresh record intra-day and closing lows.
On Friday, the Indian rupee plunged to over 71 — the lowest ever mark — against the greenback at the Inter-Bank Foreign Exchange Market. It surpassed the previous record low of 70.85 to a greenback.
The Indian currency closed the day’s trade at a new record low of 70.99-71 per US dollar, 25 paise weaker than its previous close of 70.74 per greenback.
Rushabh Maru — Research Analyst at Anand Rathi Shares and Stock Brokers told IANS: “Strong reading of India GDP data may provide some relief to the rupee. However, any appreciation in the rupee would be temporary as importers may rush to cover their unhedged exposure on any appreciation opportunity.”
“Exporters are likely to refrain from selling US dollars at this juncture as there are talks of rupee moving towards 72-73 levels.”