The bounds for the next quarter would be in the range of 68.40 to 71.60 where we can expect the INR to trade in.
The Indian rupee has been moving in line with our estimates. The mention that “ ...we could be looking at the USD-INR to move towards 71 and 71.60 in the next few weeks. We advocate to engage in trading as well as introducing a hedge against a weaker rupee…” proved to be quite timely as we are nearing the first target zone.
A surge in global oil prices spooked the rupee. With currency waivers issued to India expiring earlier this month, there is a certain panic set into the system that has made the rupee weaker.
Elevated crude prices could widen the country’s current-account deficit and stoke inflationary pressures. RBI meanwhile is attempting to inject liquidity into the system by engaging in long term foreign exchange buy/sell swap. While the effect could be a little delayed, the foreign exchange reserves are definitely getting dented.
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