 "Indian Rupee")
Rupee crossed the 68 mark against the US dollar in trade on Friday, as comments by the US Federal reserve chair, Janet Yellen, raised concerns regarding a possible hike in interest rates in December policy review.
Analysts at ICICI Securities expect the rupee to hit 68.1 levels going ahead. In a note, they recommended buying USD/INR November Futures contract on the National Stock Exchange (NSE) in the range of 67.55 - 67.65 for a target of 67.9 - 68.1 with a stop loss placed at 67.45.
Here are five reasons that pushed the rupee to 68 levels:
Possible rate hike by the US Federal Reserve: Rupee advanced against dollar, as yield on 10-year sovereign debt stabilised after steep decline earlier in the week. USD hit its highest levels of the day against G-10 currencies following Yellen comments that FOMC’s November judgment still holds, suggesting a 2016 rate hike is likely.
Strong US economic data: Data from US housing sector released Thursday showed building permits and housing starts surpassed expectations and witnessed a healthy growth for the month of October. The weekly jobless claims for week ended November 11, too, unexpectedly dropped to 2,35,000 as compared to previous week's 2,54,000 and reaffirmed the US labour market's underlying strength. The economic data reinforced expectations that the US Fed would hike interest rates in December.
Sell-off by foreign investors: In line with global peers, Indian markets have also seen a sell-off since the outcome of the US Presidential elections. The Nifty has slipped nearly 5% or over 400 points since November 9 amid strong selling pressure from overseas investors. This, in turn, has impacted rupee as well.
Foreign Institutional Investors (FIIs) and foreign portfolio investors (FPIs) have sold equity shares worth over $1 billion in the past few trading days after the government last week demonetised Rs 500 and Rs 1000 currency notes. As per data from the National Securities Depository Ltd (NSDL), since November 9, FIIs and FPIs have been net sellers at $ 958 million (Rs 6,432 crore) till Tuesday.
As per provisional stock exchange data, FIIs sold an additional shares worth of Rs 1,957 crore on Wednesday, taking their total net outflow of Rs 8,389 crore ($ 1.25 billion) in the past five trading sessions.
Fund Outflows: Weak equities stoked concerns on foreign fund outflows amid bets the US President-elect Donald Trump’s proposed fiscal policies will fuel inflation and lift interest rates in the world’s biggest economy.
US bond yields: Expectations on a fiscal stimulus from Mr Trump has already driven US bond yields sharply higher, pushing the dollar's index against a basket of six major currencies to its highest level since 2003. Last week, a surge in the benchmark US bond yields had sparked fears of capital outflows from emerging markets (EMs), hurting their stocks and currencies. As a result, the Nifty 50 lost 229 points, or 2.7%, witnessing its biggest drop in 2016 and most since February 11. The rupee then closed at 3-month low of 67.25 a dollar mirroring losses in other EM currencies.
