Rupee appreciates 10 paise to 66.32 against US dollar on positive economic outlook

NEW DELHI: The rupee appreciated 10 paise to 66.32 against the US dollar in early trade on Wednesday following a slew of positive domestic economic data and forecasts suggesting an above normal rainfall this year after two years of consecutive drought.

Improving economic readings and good monsoon may increase foreign inflows to India and may help the domestic currency appreciate.

Madan Sabnavis, Chief Economist, CARE Ratings, said that India’s fundamentals as of today appear to be fairly strong and the rupee should remain wherever it is, but expected the local unit to depreciate in the coming months.

“When the redemptions of FCNR deposits happen, it will put a lot of pressure on the currency. I would not be surprised if we see the rupee depreciating fairly sharply at that point of time because I do not think we have the kind of equipment, which is with us in terms of forex reserves to really bear this $ 20-30 billion redemptions,”Sabnavis said.

Experts believe that the dollar may weaken in the coming two months and that should help the rupee to appreciate. “The dollar will remain soft for the next one or two months with the Fed firmly on the sidelines. I am still of the belief that we will see a resurgence in the US dollar, but that is going to be a second half of the year story,” Khoon Goh, Senior FX Strategist, ANZ.

“We will see further strength in the rupee if we get improved risk sentiment, more for inflows into the Indian asset markets. We could well see the rupee starting to strengthen towards that 66 or sub 66 levels,”Goh said.

Data available with NSDL showed the foreign portfolio investors (FPIs) have infused over Rs 24,500 crore into domestic equities since March 1.