The Indian currency may lose out to the dollar this week, as the US government is expected to reach a consensus to avoid defaulting on the $14.3 trillion debt obligation before the Tuesday deadline.
The rupee appreciated by around 17 paise or 0.4 per cent as dealers took advantage of interest rate differentials after the policy rate hike by the Reserve Bank of India (RBI) last week. The rupee closed at 44.19 against the greenback on Friday after touching a three-month high of 44.08 during the week.
“Most likely there could be a debt limit extension for a couple of months for $1-1.5 trillion, thereby buying more time to meet the obligations, in which case there will be some correction in the rupee,” said Abhishek Goenka, chief executive officer, India Forex Advisors. He expects the rupee to range 44.15-44.45 against the dollar this week.
Concurring with Goenka’s view, Axis Bank treasury head Parthasarthy Mukherjee said some resolution is expected this week and the rupee may lose last week’s gains.
The euro’s movement will be closely watched by market participants.
“The euro is expected to stay volatile as we are getting mixed news from the euro zone,” said Sandeep Gonsalves, forex consultant and dealer from Mecklai & Mecklai. He expects the rupee-dollar pair to trade in the 43.90-44.40 range this week.
Also, dollar demand from oil and capital goods importing companies may cap rupee appreciation this week. The dollar index closed at 73.90 on Friday as compared to 74.20 a week earlier.