Indian rupee is expected to see a pull back against the US dollar in the next fortnight, on the back of increased FII (foreign institutional investor) inflow into the Indian market and renewed hopes on another bumper agriculture production this year.
Foreign currency market experts said rupee is expected to strengthen by a percentage point to 74.10 – 74.20 level in the next few days, against the current level of 74.85 against the greenback.
While FII inflow into India has reached $1.89 billion so far this month, rain deficits witnessed in July were wiped out after the on-going heavy downpours in several states since the beginning of this month.
“The market players seemed to be discounting concerns on the Corona pandemic front and also the heightened expectations of any major gains for dollar from a second round of US stimulus package,” Ajay Kedia, managing director of Kedia Commtrade and Research, told Arabian Business.
“The dollar index is also expected to see a downward trend mostly for this month,” he added.
Historically NRI (non-resident Indian) remittances see a surge when rupee value drops against the US dollar.
However, this time around, financial sector market consultants said the current appreciation expected in rupee may not impact remittances, especially from the Gulf countries because of the large-scale return of Indian expats from there.
“Expat Indians who are returning to India – whether from the Middle East because of job losses or from the US and other countries because of work from home arrangements – will have no option but to keep making remittances to India,” M R Rajaram, a leading financial market consultant, said.
Rupee opened higher at 74.83 per dollar in the morning trading hours on Tuesday, against previous day’s close of 74.90, amid buying seen in the Indian equity market.
Despite the current trend of rupee gaining marginal strength, walletinvestor.com, which tracks foreign currency markets, has predicted that rupee could again plunge to 76 against the greenback in September, and remain weakened in the rest of the year period.
Fitch Solutions in its report in March this year has revised down its forecast for the Indian rupee, saying the currency will average 77 per US dollar in 2020 and 80 in 2021 amid ongoing global risk-off sentiment and likely steep monetary easing.
The Indian currency, which plunged to 76.97 on April 21 this year, averaged at 75.04 in the last 4-month period.
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