It was another good week for the Indian rupee, as the local unit appreciated towards 58.00 handle against the US dollar, not seen since summer of last year.
A steady flow of FII money into equity and debt segments have overwhelmed what little buying that occurred from the importers. RBI has been active in the Dollar/Rupee market, shoring up reserves.
Economic data from Euro zone was mixed with business sentiment surveys weaker than expectation but still pointing towards improvement.
US economic data has been better than expectation except for the US housing sector. A down tick in the US long bond yields, which if sustained can help the US housing sector in the coming months.
US Dollar has managed to score some gains against the Euro, as traders have preferred to sell the single currency on the back of divergent monetary policy directions between US and Euro zone.
Euro has weakened by a large margin against the rupee as well.
British Pound and Yen have remained largely flat against the US dollar but have weakened against the Indian rupee.
Over the near-term, we expect Indian rupee to trade with an appreciating bias within a range of 57.50/58.00 and 58.80/58.30 levels on spot. Euro and Yen to remain weak but British Pound to grain traction against the rupee.
By Anindya Banerjee, analyst, Kotak Securities