Rupee likely to witness volatility next week
As RBI has been buying dollars this month, volatility was at an all-time low of 1.50 per cent. This could be the plausible explanation for the rupee falling to its all-time low on Friday
The dollar index witnessed very high volatility and recovered from their lows after better than expected US existing home sales data - Rahul Kalantri, Vice-President (Commodities), Mehta Equities
Mumbai: As the Reserve Bank of India (RBI) has allowed the rupee to weaken, the rupee fell to its lowest closing recently. In non-deliverable forward (NDF) contracts also, it surged up to 83.70 against US dollar on Tuesday before recovering back due to RBI’s presence from sell side. The forex reserves surged to an all-time high of $642.50 billion as RBI took delivery of $5 billion swap due on March 11.
As RBI has been buying dollars this month, volatility was at an all-time low of 1.50 per cent. This could be the plausible explanation for the rupee falling to its all-time low on Friday last. With RBI accumulating reserves, they would endeavour to protect the rupee to some extent though their overall interest would be to protect exporters costing so that exports surge while imports come down and are replaced by indigenous production.
Earlier, rupee climbed to 83.45 against US dollar, which was a low since Jan 24. The sentiments have changed after US Fed, Swiss National Bank (SNB) and Bank of England (BoE) meetings as market factored in faster rate cuts by Europe but possibly no cuts in US as data from US is still great but Europe seemed to be in economic recession. RBI has accumulated good enough reserves in these last few days to protect any big downside move in rupee.
Talking to Bizz Buzz, Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors, says, “Flows will continue, but with change in sentiment, rupee could become a buy on dips from sell on upticks.” Rupee dropped to its lowest level in three months amid the rise in the US dollar and higher US Treasury bond yields.
Rahul Kalantri, Vice-President (Commodities), Mehta Equities, says, “The dollar index witnessed very high volatility and recovered from their lows after better than expected US existing home sales data.” Despite strong gains in the domestic equity markets and profit taking in global crude oil, the rupee witnessed a drastic fall. We expect the rupee to remain volatile next week and the pair could trade in the range of 83.10-83.70, he added.
