The Indian rupee is expected to see a fall in the coming days against the US dollar due to the combined impact of the fiscal year-end demand for the US dollar and the rising US bond yields.
Rising concerns over crude prices and another wave of coronavirus infections in several parts of the South Asian country are also expected to affect the sentiment on the outlook for the rupee value in the short-term.
Historically, remittances by non-resident Indians (NRIs) see a surge whenever the rupee weakens. Gulf-based expat Indians account for a major portion of remittances sent to India.
Forex market experts predicted the Indian currency, which has been trading around 71.50 – 72 to $1 in the recent days, may reach 75 rupees against the US dollar in the next fortnight.
The rupee continued its downward trend on Monday, depreciating by 31 paise, or 0.42 percent, against the greenback and opened at 73.77 against the dollar in the morning trading hours.
Ajay Kedia, managing director of KediaCommtrade and Research.
“The increasing demand for dollars in March – the fiscal year-end in India – along with the rising concerns over crude prices are expected to weaken rupee value against dollar in the short-term,” Ajay Kedia, managing director of KediaCommtrade and Research, told Arabian Business.
“Our assessment is that rupee could fall to 74.80 to 75 against the US dollar in the next fortnight,” Kedia said.
Several factors have led to the rupee’s recent depreciation.
“Increased outflow by foreign portfolio investors and concerns over a second wave of the virus infection is several states, especially in the country’s financial market Maharashtra, together are causing rupee depreciation,” Nikhil Kamath, co-founder and chief investment officer of Zerodha, India’s largest retail trading platform, told Arabian Business.
Nikhil Kamath, co-founder and chief investment officer of Zerodha.
Kamath, who is also the co-founder of hedge fund True Blue, however, thinks that the rupee could see a low of 74.50 against dollar in the short-term.
The currency dived 104 paise to settle at 73.47 rupees against the US dollar on Friday, following a heavy selloff in domestic equities and strong American currency in the overseas market.
On Friday, the Dollar Index, which gauges the greenback’s strength against a basket of six currencies on a scale of 100, moved up from 90 to 90.52.
Kedia said the Indian market is seen to be overheated currently and that market players and experts are anticipating a correction in the near future.
“This could also keep the rupee exchange value on the tender hooks in the coming days,” he said.
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