FCNR(B) and FPI inflows seen as key drivers for rupee
Strong capital inflows and stable crude prices could support the rupee, while policymakers monitor global risks and monetary policy trends.
The USD/INR exchange rate hit the 94 mark, with FCNR(B) inflows and Foreign Portfolio Investment (FPI) flows acting as key drivers for the Indian currency, according to Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities. Banerjee stated that the rupee would likely appreciate up to 94, with a technical significance of that level.
Should the rupee exceed 94, exporters may begin hedging, potentially driving the currency lower towards 92. With the rupee trading near the 95 level against the US dollar, Banerjee pointed to capital inflows as central to its potential strengthening, contingent upon oil prices staying within the USD 80 to USD 90 range. Currently, the Indian Rupee is close to 95, and stable oil prices between USD 80 and USD 90 are deemed crucial for the domestic unit.
Banerjee highlighted that over USD 40 billion of FCNR(B) flows and FPI inflows have already been received, with significant inflows expected in the coming two months. He cautioned that external uncertainties, such as the situation in West Asia, necessitate maintaining a robust capital buffer, even if oil prices drop to USD 70 or below.
Banerjee also noted the influence of macroeconomic factors, including US Federal Reserve policy and currency shifts. He emphasized the need for a strong cushion by September, potentially reaching USD 60 to USD 70 billion, to navigate the fiscal year's uncertainties. Regarding central bank intervention, Banerjee suggested it is premature for the RBI to begin buying dollars, as the rupee is currently near 95.
He anticipates that central banks will remain cautious, monitoring global developments before making any significant policy changes.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
