Expert take on the week's trend: Rupee

(Roy Paul, Deputy General Manager-Treasury Federal Bank)

Three major concerns are currently weighing forex market sentiments. The uncertainties regarding the Greece bailout plan, toned-down expectations of a large revaluation of the yuan and the gradual shift from risk appetite to risk aversion. The cumulative effect of all above factors is likely to lead to general dollar strengthening bias and reduction of long positions in emerging market currencies.

The rupee, though better placed, can be no exception. The recent rupee strength was backed mainly by huge capital inflows. With the domestic equity valuations getting stretched, as revealed by the high market cap-GDP ratio, there is every probability of buying interest waning, resulting in reduced FII flows. Technically too, the rupee looks weak. If the 44.85 level is breached, then the pair can stretch to 45.25.