An alarming rise in Covid-19 cases will keep the Indian rupee under pressure this week against the US dollar and the dirham, despite a surge in the country’s foreign exchange (forex) reserve.
The rupee ended last week at 74.5 versus greenback or 20.3 against dirham, registering gain for the first time in three weeks, driven by a surge in forex reserves and the broad-based weakness in the dollar.
The Reserve Bank of India (RBI)'s latest data for the week, ending on April 9, showed that forex reserves surged $4.34 billion to $581.21 billion.
Arun Leslie John, chief market analyst at Century Financial, said the rupee is still trading at a loss of nearly 2 per cent, owing to the surge in Covid-19 cases and RBI’s unchanged repo rates.
He said the US dollar slid, despite robust US economic data, primarily driven by the pull-back in longer-dated US Treasury yields, as Federal Reserve officials reiterated a dovish guidance.
“Investors now seem convinced that the Fed will keep interest rates near zero levels for a longer period,” he said.
John predicted a bumpy road for the Indian rupee due to surging Covid-19 cases, potential gross domestic product (GDP) and earnings downgrades acting as headwinds for the currency.
“For the week ahead, the US dollar and Indian rupee pair is expected to trade in the range of 74-75.5 (20.16-20.57 versus dirham),” he added.
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