The Indian rupee is expected to fall to INR77 against the US dollar on a short-term basis, weighed down by concerns of increased foreign institutional investors (FIIs) outflow from the country and high crude prices.
The downward trend in the Indian currency, however, is good news for dependents of Gulf-based expat Indians in the forthcoming Diwali festive season as they would be able to get more rupees from remittances by their non-resident Indian (NRI) family members.
Gulf-based expat Indians account for a larger share of NRI remittances to India. NRI remittances tend to surge whenever the rupee tumbles.
“The recent trend of increased FII outflow and rising concerns on the inflation front due to high oil prices could weigh down the exchange value of rupee against the US dollar on a near-term basis,” Ajay Kedia, managing director of Kedia Comtrade and Research.
“The rupee is expected to fall to 76.40 in November as per our technical chart. On the higher side, the rupee could get support at 74.10,” Kedia added.
Foreign portfolio investors (FPIs) continued to be net sellers in the Indian capital market – to the tune of $304 million.
A recent report by Swiss investment bank UBS said the Indian currency is expected to weaken to INR77 per dollar by the end of the year.
The strategists at UBS also predicted the possibility of the rupee depreciating to 79.5 against the greenback by September 2022.
The Indian currency traded around INR75 per dollar in late October, not far from a 16-month low of 75.4 reached early in the month, as traders waited for news from top policymakers at US Fed next week.
The month-end demand for dollars is also seen adding to the weakening of rupee value.
The rupee exchange value recovered moderately to 74.84 per dollar in the morning trading hours on Thursday, after closing lower at 75.03.
“The rupee is expected to trade on a negative note on the back of higher FPI money outflows. Further, investors will remain vigilant ahead of major central bank monetary policies and key economic data from the US,” ICICI Direct, an institutional retail trading and investment service, said in a note.
The concerns on the rising trend on FPI outflow were also reflected on currency exchanges, with the rupee future expiring on November 26 declining 0.08 percent.
ICICI Direct analysts said a sharp downside on the rupee was prevented by lower crude oil prices and a marginal decline in the dollar.
The dollar index – which gauges the greenback’s strength against a basket of six currencies –slipped 0.15 percent after a sharp fall in US treasury yields and disappointing goods trade balance data from the US.
Forex market experts said the rupee’s resilience has primarily been because of two reasons: first, sustained foreign fund flows into the Indian market and second, the Reserve Bank of India’s management of the volatility.
Diwali – the Indian festival of lights – will fall on November 4. The market, however, is expected to witness a subdued demand this season due to rising fuel and consumer prices in India.
Petrol and diesel prices rose to as high as $1.56 and $1.43 per liter respectively in some of the cities, pushing up prices of many consumer products, especially food items, due to high transportation costs.
(Except for the headline, this story has not been edited by The Finance World staff and is published from a syndicated feed.)