Rebound in oil prices, equities to stiffen rupee: Experts

stiffen rupee

Rebound in equity markets, coupled with strengthening crude oil prices and hopes of an interest rate cut are expected to stiffen the Indian rupee in the coming week, experts said.

“We expect a more stable rupee in the coming week. The stability is expected from a rebound in global equities and crude oil prices,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities.

“Expectations of further reduction in policy rates has also helped. Overall the risk appetite may continue to offer support to rupee over the near term. We can see a range of 67.20-68.20 on spot.”

According to Banerjee, seasonal factors should support the strengthening trend in rupee’s value.

“Seasonal factors, a bear rally and expectations on further reforms in the domestic economy should arrest the fall in rupee value and give it support at levels near 66.80-67 to US dollar,” Banerjee added.

Other market observers have predicted the rupee to hover around 67.20-68.15 to a US dollar in the coming week.

“Rupee looks like having a comeback next week. It may possibly come to around 67 levels (post break of 67.45),” Hiren Sharma, senior vice president, currency advisory at Anand Rathi Financial Services, told IANS.

“Overall range of 67.20-68.15 may hold, for this a crude oil prices comeback is required. With Euro easing commitment and moreover winter season demand (in US and Europe) will slightly edge up oil price – impacting risk on mood.”

Crude oil prices have slightly edged-up to around $30 per barrel from lows of $26-$27.

Besides, Chinese macro-data that pointed to stability in the Asian economy should soothe investors nerves.

Even the clarification from Chinese Vice President Li Yuanchao that the country has no plans to pursue a devaluation policy has cheered investors.

Lately, the Chinese Yuan has been holding on a steady trajectory with positive liquidity coming in from the PBOC (People’s Bank of China).

On a weekly basis, the rupee closed flat at 67.63 (January 22) to a US dollar from its previous close of 67.63 to a greenback (January 15).

However, it touched a 28-month low of 68.17 to a US dollar — its weakest level since early September 2013 during the intra-day trade on January 20.

The National Securities Depository Limited (NSDL) figures showed that the FPIs were net sellers during the week ended January 22 2016. They divested Rs.8,836.59 crore or $1.30 billion in the equity and debt markets from January 18-22.

Similarly, the data with stock exchanges showed that the FPIs sold stocks worth Rs.4,634.64 crore in the week under review.

On technical levels, rupee still shows a tendency towards moving higher to 68.20 to a US dollar.

“In near term spot can move lower towards 67.45/50 which will hold the downside and market will move higher from there towards 68.20,” said Hemal Doshi, chief currency strategist, Geofin Comtrade.

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