The sovereign rating downgrade in the euro zone is not likely to weigh heavyily on the Indian currency, thanks to the measures taken by the central bank last month. Market participants are of the view that the rupee will range at 51-52 against the dollar this week.
“Of late, the rupee has not been tacking the movement in euro. Hence, the impact may be marginal,” said Ashutosh Raina, chief dealer at HDFC Bank. He expects the rupee to open around 51.75 against the dollar on Monday.
The rupee closed at 51.56 against the dollar on Friday, registering a 2.2 per cent appreciation over the previous week. On the other hand, the euro has depreciated against the dollar in the same period.
More pain is likely for the euro when markets open this week. On Friday, Standard & Poor’s downgraded nine euro zone sovereigns saying that the recent initiatives taken by policymakers may be insufficient to fully address the ongoing systemic stress in the region. The long-term ratings on Austria, France, Malta, Slovakia, and Slovenia were lowered by one notch, while long-term ratings on Cyprus, Italy, Portugal, and Spain slipped by two notches.
However, measures taken by the Reserve Bank of India (RBI) over the past two months to increase dollar inflows and curb speculation will help the rupee. “Earlier, there was a lot of speculation in the rupee, which made it very vulnerable to any such development,” said Parthasarthy Mukherjee, president-treasury and international banking at Axis Bank. He expects the rupee to trade in the range of 51-52 against the greenback this week.
The rupee has registered consecutive weekly gains this month. It was supported by fund inflows from Foreign Institutional Investors as they took advantage of the enhanced investment limits in government securities. According to data from the Securities and Exchange Board of India, there have been net investments of $2.5 billion in the debt segment since the start of this month. Going forward, inflows can be expected on the back of measures taken by the RBI. “Fund inflows will be a key factor to watch for. I am slightly bearish on the rupee for this week,” said Abhishek Goenka, CEO, India Forex Advisors.
