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After appreciating for five consecutive trading sessions, the rupee weakened on Tuesday due to dollar demand from importers and defence-related payments. Besides, there were concerns in the market the government had put on hold plans for inclusion of Indian bonds in a global bond index. However, currency experts believe the domestic currency’s strengthening spree might continue, as the country heads towards general elections.
The rupee ended at 60.95 against the dollar, compared with the previous close of 60.84. The rupee had opened at 60.85 to the dollar. During intra-day trades, it touched a high of 60.60 and a low of 60.98.
Barclays said in a report the rupee is likely to rally to 59 in the short term on account of a narrowing current account deficit, higher inflows from foreign investors and easing inflation. “We lower our one month dollar/rupee forecast to 59.0 (61.0 previously) and recommend being short dollar/rupee targeting 59.0 with a stop-loss at 62.5. We think recent positive rupee momentum, on the back of a narrowing current account deficit, softer inflation prints, enhanced policy credibility and strong capital inflows, will continue in the near term,” the report said.
The report also said there could be a pre-poll rally in all asset classes in the country,as investors expect a pro-market BJP government to form the next government.
Meanwhile, government data released on Tuesday showed trade deficit narrowed in February on a sharp fall in imports. This would further ease pressure on the current account balance. The trade deficit stood at $8.13 billion, 40 per cent lower from the year-ago period.
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“After the US announced tapering, the rupee did not weaken much due to which since then we were expecting the rupee to appreciate. A month down the line the rupee should be around 59-60 and the bias is more towards appreciation,” said Anjali Verma, economist at MF Global India.But a few currency experts believe the level of the rupee touching 59 to the dollar may not be sustained for long. “If there is one more rally in the stock market during the month, the rupee may touch 59 to the dollar. But this level may not be sustained for long, as the stock market may see some corrections after the rally,” said Pramit Brahmbhaat, CEO, Alpari Financial Services, (India).
Since August 28, when the rupee had touched an all-time low of 68.85 to the dollar, during intra-day trades, the currency has appreciated by over 11 per cent.
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