The Indian rupee is staring at three headwinds:
* Maturity of forex swaps with oil firms of $7 billion in February-April. OMCs have already covered up to 50% of the oil swaps that come due in Feb-March
* Bank/corporate forex repayments of $4.8 billion in March.
* Withdrawal of gold import curbs after March with inventories running down.
Key events to determine rupees sway
According to Bank of America Merrill Lynch, investors favour the Indian rupee among the so-called fragile five (Brazil, India, Indonesia, S Africa, Turkey) currencies. The rupee has depreciated relatively less than most BRICs and TIMS (Turkey, Indonesia, Mexico and South Africa) in this round of FX volatility. However, investors are worried that India remains vulnerable to a protracted emerging markets (EM) sell off. The rupee can test R 68/$ levels again in case the US Dollar appreciates to 1.20/euro levels.
Source: BofA Merrill Lynch Global Research, Haver Analytics, IMF, BIS