Supporting Growth: Low Macroeconomic Rates to Keep the Rupee Under Pressure (IANS Currency Forecast)
As a result, low macro rates pushed bond yields higher and further stoked inflationary fears, hurting the outlook for the rupiah.
“The rupiah is likely to weaken a bit more as the central bank (RBI) opted to support growth and keep rates unchanged,” said Sajal Gupta, Head Fx & Rates at Edelweiss.
“Other factors such as high domestic and US bond yields, as well as higher prices, a higher trade deficit and weaker economic growth forecasts all support this trend.”
On the other hand, Gupta added that a weak rupee will help the country’s exports achieve higher growth.
Last week, the rupiah closed at 76.18 against the greenback.
According to Devarsh Vakil, Deputy Head of Retail Research, HDFC (NS:) Securities: “The Indian rupee is expected to weaken further next week as the price of crude oil surged on geopolitical concerns. Foreign funds have been aggressive sellers of Indian equities, which is also a major sign of concern.”
“The Federal Reserve is expected to raise interest rates by 50 basis points in May and also start shrinking its balance sheet. The RBI will lag the US central bank and will likely raise rates in June. further depreciation of the rupee.”
Vakil expects it to head north with resistance placed at 76.50, while on the downside it should hold support around 75.70 on the dollar.
Additionally, Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal (NS:) Financial Services said, “Market participants will be watching the behavior of global crude oil prices as they have rallied strongly from recent lows.”
“Broader dollar strength is likely to keep the rupee weighty and we expect USDINR (spot) to trade sideways and range between 75.70 and 76.50.”
(Rohit Vaid can be contacted at [email protected])