Rohit Vaid Mumbai, 31 December : .Rising exports led to heavy FII outflows that weakened the Indian rupee.
High crude oil prices and the tapering actions of the US Fed added to India’s woes.
The rupee was able to balance the market due to RBI’s suspected intervention as well as IPO inflows.The rupee fell by 1.78 percent to 74.34 against a US Dollar, compared to 73.06 December 31, 2020.
In 2021 USD/INR was volatile, making an ascending triangle.According to Sajal Gupta (Head, Forex and Rates at Edelweiss Securities), the range broke in November and reached a peak of 76.41.
He said, “But, it plummeted sharply towards the year end by nearly Rs 2 to 74.909”
In May, the rupee appreciated by 2 percent and declined by 2.55 percent in June.
After November, the rupee was severely affected by FPI outflows in excess of $12 billion.FPIs continued to invest in the market at the start of 2021.
However, once the US Fed declared tapering measures FPIs stopped selling and booked profits.
Purohit said that the Indian rupee was one of the most stable currencies within Asia-Pacific, owing to India’s large foreign currency reserves and higher foreign direct investments inflows.
Indian currencies were supported by IPO-bound funds of over Rs 80 311 crore and healthy monthly exports.
The rupee experienced a fourth consecutive depreciation in relation to the US dollar.”Global central banks began to reduce ultra-loose monetary policies in the face of surging commodity prices, which raised fears about higher inflation,” Devarsh Vakil (Deputy Head, Retail Research), HDFC Securities.
Jateen Trivedi (Senior Research Analyst, LKP Securities) says that the new Covid Omicron variant is making an impact on markets.
Tapering by the US Fed will play an important role in the trend in dollar index and ultimately in all currencies.
The OPEC + production outcome will be closely watched, as the rupee could ride on an increase in crude oil production.
We will also be watching the RBI’s policy rate and, in the event of Fed tapering, it could lead to RBI changing its outlook on hiking.
Contact Rohit Vaid at [email protected]
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