Rising trade deficit to dampen rupee's prospects

By Rohit Vaid

New Delhi, Jan 17 (IANS): Rising trade deficit along with chances of a populist budget might dampen rupee's prospects during the coming week.

Nevertheless, persistent interest of FIIs in India's equity market will arrest any sharp depreciation moves.

"The 25-month high trade deficit may put brakes for strong rupee appreciation. Equity markets also looks stretched and a cool-off looks imminent now. Eyes will be on the budget and the ballooning fiscal deficit, which can be a challenge for the local currency," said Sajal Gupta, Head, Forex and Rates, Edelweiss Securities.

On the other hand, new IPOs and hopes of healthy Q3 earning results will retain FIIs' interest in equities.

"We have two IPO subscriptions next week, which can attract FII participation and keep the USDINR spot lower," said Rahul Gupta, Head of Research-Currency at Emkay Global Financial Services.

"However, RBI's intervention will be eyed. In spot 73 is acting as strong support, a break of which will push prices towards 72.70-72.75 and then the 72.50 zone. However, 73.50 will act as immediate resistance," he added.

Till now in January, FIIs have invested around $ 2.3 billion in equities.

Consequently, the rupee continued to appreciate and closed at 73.07 to a greenback.

"We have an important event this week. President-elect Joe Biden and Vice President-elect Kamala Harris will be sworn in during the 59th inaugural ceremony in Washington DC on January 20. It is important that this event passes peacefully in light of the recent violent attack by Trump supporters on the US Capitol. We expect rupee to consolidate in the range of 72.75 to 73.3 for this week with depreciating bias," said Devarsh Vakil, Deputy Head of Retail Research at HDFC Securities.

The swearing-in assumes significance since the incoming US administration has announced a new stimulus package. If enacted, the $1.9 trillion package will deliver a further jolt of fiscal stimulus to the struggling US recovery.

"As the newly elected President takes charge more clarity on the stimulus package will be important to watch. Market participants will also be keeping an eye on the ECB and Bank of Japan policy statement; expectation is that the both the major central banks are expected to maintain a dovish outlook," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.



Top Stories

Leave a Comment

Title: Rising trade deficit to dampen rupee's prospects

You have 2000 characters left.


Please write your correct name and email address. Kindly do not post any personal, abusive, defamatory, infringing, obscene, indecent, discriminatory or unlawful or similar comments. Daijiworld.com will not be responsible for any defamatory message posted under this article.

Please note that sending false messages to insult, defame, intimidate, mislead or deceive people or to intentionally cause public disorder is punishable under law. It is obligatory on Daijiworld to provide the IP address and other details of senders of such comments, to the authority concerned upon request.

Hence, sending offensive comments using daijiworld will be purely at your own risk, and in no way will Daijiworld.com be held responsible.

Security Validation

Enter the characters in the image