A stall in domestic and Asian equity rally can be expected to support the at lower levels. Continuing confidence among foreign investors in the local equity market has been a major supporting factor for the sustained weakness in the currency pair. Despite the intervention fears, weakness in the US dollar supported the currency pair to sustain its recent low.
The rupee tested an intra-day high of 72.94 on Thursday and its sharp gains were prevented amid surge in prices and worries over rising coronavirus cases across the globe. In the CY 2020, RBI undertook large-scale intervention in the market absorbing most of the dollar inflows aggregating to over USD 125 billion which reflected as an increase in forex reserves. In the current calendar year also, persistent forex intervention will see the rupee underperforming the regional currencies. The strong build-up of forex reserves could make the rupee to fare better than peers such as the Indonesian Rupiah and Philippine Peso, in the event of sudden dollar’s strength and a surge in oil prices.
Global stocks retreated from record highs. US dollar is trading flat today at 90.10 after falling more than 0.35% overnight. Euro is trading higher today at 1.2173 on support from the ECB keeping policy steady and accommodative. The pound traded a 2-1/2-year high at 1.3746 overnight based on Britain’s vaccine roll-out will boost the economy.
After gaining in recent days, Asian currencies fell today. Indonesian Rupiah dipped by 0.62%, Won down by 0.31% and Taiwanese dollar down by 0.29% at this point of time. Most of the Asian currencies have depreciated against the dollar.
All the Asian stock indices are down today, led by Jakarta stock exchange which fell by 1.53% followed by and Taiwanese Weighted Index down by 1.30% and 0.68% respectively as of now. Asian stocks are trading lower today as investors took some money off the table after a recent rally that was driven by hopes of a massive US economic stimulus plan by the new US administration.
Weakness in the US dollar aided gains in the domestic currency even as many parts of the world are reporting rising coronavirus cases. The recent pullback in the US dollar helped riskier currencies to gain and yesterday the rupee was seen making highs below the 73.00 mark.
With the Central Bank expected to remain active on both the side with an objective to raise their forex kitty, we may not see strong appreciation in the rupee. Till the end of March 2021, the rupee shall remain in the range between 72.80 to 73.80 with a bias on the downside in the post-budget period.