The rupee, which touched 45.61 on Friday, more than a six-week high appreciating by nearly 1.1% during the week, is expected to strengthen further. Dealers expect the rally in rupee to continue saying it could move beyond Rs 45.5, given the strong foreign institutional investors (FII) inflows into the Indian stock market. “We are bullish on the Indian currency. The Budget is looking very positive for investments into the country and we expect the FII inflows to continue,” said C Chandrasekhar, senior vice-president at Mecklai Financial. Chandrasekhar expects the rupee to trade at 45.5-46 levels against the dollar this week itself.
In the Budget for 2010-11, finance minister Pranab Mukherjee has promised to restrict the deficit to 5.5% of the gross domestic product (GDP) in the financial year beginning from April 2010, from a 16-year high of 6.7% this year. He also plans to improve government finances by raising more money from stake sale in public sector undertakings.
So far, FIIs have pumped in close to $800 million in March alone. The Bombay Stock Exchange’s Sensitive Index of stocks has increased close to 3.4% this week. Meanwhile, global crude oil prices were trading towards $81 a barrel in London on Friday. Forex dealers have noted that the strengthening in the local currency is also on account of sustained dollar selling by exporters, amid signs of higher capital inflows.
Madhusudan Somani, head of foreign exchange trading at YES Bank too said that the strengthening of the Indian currency will continue for the next week as well.