Rupee likely to depreciate this week

In the coming week, the rupee may feel pressure and depreciate as month-end demand from oil importers for dollars could limit the upside, Angel Commodities’ analyst Amar Singh has said in a report.

The rupee hovered around the 48-mark last week and could breach this level in the coming week, taking cues from the equity markets and higher dollar demand from domestic buyers, Singh said.

Concerns over the economic front may also lead to choppy equity markets and lead to worries over capital inflows in the country. The Indian rupee appreciated last week, but month-end demand by oil importers limited the upside in the currency. Refiners are the largest buyers of dollars in the domestic market to make import payments.

Marginal losses in the last week on the domestic equity front also limited the upside. The Sensex made weekly losses of 0.3 per cent. But equities have gained in this year due to foreign buying to the tune of almost $11 billion. The rupee appreciated to a level of 47.84 in the last week.

India’s foreign exchange reserves dipped $208 million to touch $280.77 billion during the week ended September 18.

Meanwhile, India’s wholesale prices index returned to positive as food prices surged. Country’s inflation index rose 0.37 per cent from a year earlier in the week-ended September 12.

The annual inflation rate is slowly picking up after 13 successive weeks of on-year declines in wholesale prices, due to sharp rise in food prices and a weakening impact of the base effect.

Last weeks data from the US economic front has not been impressive and that led to risk aversion in the financial markets. Investors turned to the dollar as risk appetite slumped.

Markets are currently expecting positive economic data and any negative data form that front hurts risk appetite in financial markets. The number of US homes listed for sales declined almost 3 per cent in August compared to July.

Stabilisation of the hard-hit US housing market is seen as a key to an economic recovery in the United States.

Unemployment claims on the other hand dropped unexpectedly last week to the lowest in two months, indicating that firings are slowing as the economy pulls out of the recession.