The spot rupee is expected to rule in the 45.70-85 range against the US dollar this week.
The key to the appreciation of the spot rupee in recent times has been the surge in foreign exchange inflows from foreign institutional investors (FIIs) owing to the interest rate differential in India and abroad.
However, interest rates around the world (including the United States) have inched up in recent times.
Following each review of economic fundamentals, the dollar has also appreciated against major currencies.
Therefore interest rate arbitrage opportunities are not the only factors driving foreign inflows into India.
The only other factor attracting inflows into India is the bull run at the stock market. However FIIs and hedge funds will review their portfolios with the year end approaching.
Therefore, inflows are expected to peter out. In fact, available data on net inflows point to a gradually lowering of inflows into the country.
Meanwhile, India
