Indian rupee has retraced all of the pre-FOMC loses and is now trading around 61.86 on spot, a week’s high. However, action is expected to be muted as we approach the end of the year.
We expect a range of 61.00/50 and 62.50/63.00 for the next couple of weeks.
Over the medium term, volatility can rise, as rupee factors in the effect of withdrawal of liquidity from the US Fed next year and uncertainty over course of RBI’s monetary policy.
We expect, demand for Indian rupee from importers and oil marketing companies to remain strong closer to 61.00 on spot, which can cap gains beyond 60.50/61.00 levels, but at the same time, unless risk sentiments reverse materially in global financial markets, going for US dollar beyond 63.50/64.00 appears unlikely.
By Anindya Banerjee, currency analyst, Kotak Securities