Rupee Recovery (USD/INR) Not Expected To Last

Published: 3 Oct at 4 PM Tags: Dollar, America, USA, India,

Over the last few weeks US political concerns and the falling odds of stimulus being tapered by the Federal Reserve allowed the Indian Rupee to recover ground against its counterparts and gain by 5 per cent against the ‘Greenback’.

Today the Rupee achieved its strongest level for the past four days as the Federal shutdown weakened the US Dollar, while the inability to release tomorrow’s US non-farm payrolls report benefited emerging market assets.

The Rupee has also been receiving underlying support since Raghuram Rajan took over as governor of the Reserve Bank of India and laid out his intentions for stabilising India’s economy.

However, economists aren’t expecting the Rupee’s newfound strength to last, with the majority expecting the currency to be trading at the 63.00 Rupee per Dollar level by the end of this month.

The same economists predicted that the Rupee will have weakened to 64.00 within six months.

According to HDFC economist Shivom Chakravarty; ‘In the near term, the Rupee may trade in a range before another bout of Dollar-buying emerges as the Fed eventually starts to withdraw its stimulus.’

Despite the current troubles in the US and the upcoming fiscal cliff, industry experts are expecting the Fed to begin tapering stimulus in December.

As the Federal shutdown is preventing the scheduled release of September’s non-farms payroll report, which was due to take place tomorrow at 13:30 GMT, the market is unlikely to experience the level of volatility factored in with this monthly event.

However, Rupee fluctuations could be inspired by tomorrow’s HSBC/Markit services PMI. The gauge came in at 47.6 in August, below the 50 mark separating growth from contraction.

As it stands the Rupee is trading against the US Dollar in the region of 61.7350
As of Thursday, 3rd October 2013, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP USD exchange rate was 1.6162, and GBP INR exchange rate was 100.2054.

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