Indian rupee rallied for the fifth consecutive day against the US dollar on Monday on the back of selling of American currency by exporters and banks amid higher opening the domestic markets.
Indian rupee rallied for the fifth consecutive day against the US dollar on Monday on the back of selling of American currency by exporters and banks amid higher opening the domestic markets. The Indian currency has touched a high and low of 66.79 and 66.6975, respectively, in trade so far. At 12.25 pm, the domestic currency was trading 25 paise up at 66.74 against the US dollar. According to TV reports quoting Reuters, the Reserve Bank of India (RBI) may have bought dollars around 66.69 levels, which experts feel is to check volatility of the Indian currency. According to Anindya Banerjee, currency analyst, Kotak Securities,”Central Bank targets rupee volatility. With Rupee opening higher by nearly 0.5 per cent, RBI may have stepped in to stabilise the currency and augment reserves. We expect intervention to increase as a strong currency is not going to help exporters.”
“RBI will not allow too much of appreciation in rupee, Samir Lodha, MD, QuantArt Market Solutions echoed same views as Banerjee. He further added,” the only reason behind the current rally in rupee to 66.70 level is the decreased expectation that US Fed Reserve will hike rates. Latest GDP number from US for April-June quarter was only 1.2 per cent as against expectation of 2.6 per cent. Such a poor GDP number in US means, Federal Reserve will be reluctant to hike rates.”
Dollar’s weakness against other currencies globally after last week’s below-par US growth data also supported the Indian rupee. Gains in the Asian currencies markets along with expectations that Goods and Services Tax Bill (GST) may get Rajya Sabha nod this week also helped in domestic’s currency rally. On the global front, the dollar on Monday pulled away from lows it hit following disappointing US growth figures late last week while the yen pared some of its large gains made after the Bank of Japan’s smaller-than-expected stimulus steps.
So, will the Indian rupee rally continue? Experts feel that Indian rupee depreciation could come back. Lodha said, “the Indian rupee rally is driven by the expectation of low rates and not due to any genuine revival in global markets. It is unlikely to sustain and very soon we will see rupee depreciation to be back.”
Banerjee said, “We expect RBI to increase its intervention as the currency strengthens against most currencies. Rupee can trade in the range of 66.40-67.10 against dollar in the near term.”
Lodha vouches for a range of 66.50 to 69 against dollar for next 3-4 months and maintain the same even at current levels.