Home / News / India /  Indian rupee is likely to erase 81 mark in the coming week. Here's why

Despite a slight downside on Friday, the Indian rupee has managed to advance this week broadly against the US dollar. The greenback diving to its lowest level since July, coupled with less hawkish remarks from US Federal Reserve Chair Jerome Powell, and a drop in treasury yield gave the rupee much-needed support in the trading week from November 28 to December 2nd. At present, the local unit is under the 81.50 mark against the dollar. In the coming week, the rupee is expected to likely appreciate to the 80.50 level.

On Friday, the Indian rupee declined slightly to end at 81.3175 against the greenback compared to the previous day's print of 81.20 per dollar. However, the overall performance in the week is positive with an upside of 0.5% in the rupee driven by a pull back in the dollar, dovish comments of the Fed, buying in domestic equities, and a fall in treasury yields.

However, the rupee's upside in the current week is far lower than its Asian peers such as the offshore Chinese yuan, the Korean won, the Malaysian ringgit, and the Singapore dollar who also rose against the US dollar but in the range of 1.5% to 2.5%.

According to ICICI Direct's technical report, the rupee appreciated in the week and moved back to 81.00 levels as the dollar broke its major support level of 105 levels. The dollar lost its strength after Fed Chair Powell signalled that the central bank could scale back the pace of rate hikes as soon as the next meeting. Additionally, FII inflows and a rise in risk appetite in the global markets supported the rupee.

Moreover, India's forex reserves have continued to rise for the third straight week. Reserves rose by $2.89 billion to $550.14 billion in the week ending November 25 compared to $$547.25 billion in the previous week.

The start of December has been fruitful in terms of foreign funds inflow. FPIs have infused a whopping 7,437 crore in the equities. in just two days of the current month. In November, FPIs pumped in 36,239 crore in the equities market.

Going forward, ICICI Direct said the rupee is likely to appreciate back to 80.50 levels in the coming week amid weakness in the dollar and a rise in risk appetite in the global markets.

In the stock brokerage's view, the dollar has broken its major support level of 105 levels and is moving towards 104 levels on the expectation that the Fed will reduce the pace of rate hikes and is on track to increase interest rates by 50bps at its upcoming meeting.

Furthermore, it highlighted that US Federal Reserves will be less aggressive with interest rate hikes in the coming meetings, as it takes time for the full effects of those increases to ripple through the economy.


Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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