Rupee seen stable due to easing concerns of interest rate hike by US

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After recovering from a seven-month low, the rupee is set to stabilise in the near-term because of easing concerns of an interest rate hike by the US. According to experts, the rupee might trade in the range of 59-62 in the near-term, and 61-62 for the week ahead.

According to St Louis Federal Reserve Bank president James Bullard, the US should delay the plan to end its bond-buying programme, amid concerns that slowing growth in the rest of the world will weigh on recovery in the US.

The Federal Open Market Committee is expected to wrap-up the bond-buying programme at its next meeting to be held later this month. The programme, which once stood at $85 billion, now stands at just $15 billion.

“If the US delays its interest rate hike, then foreign flows will keep coming to India and that will support the rupee. Besides that, even the Reserve Bank of India (RBI) is supporting the rupee through its intervention strategy,” said the head of treasury at a state-run bank.

On Thursday, the rupee had ended at a seven-month low owing to widening of trade deficit. Trade deficit widened to $14.25 billion in September following a jump in oil and gold imports.

On Friday, the rupee rose the most in two months, even as investors pushed back bets for a hike in interest rates in the US. The rupee ended at 61.44 to a dollar, compared to the previous close of 61.85 against the greenback.

The rupee had opened at 61.69 on Friday and, during intra-day trades, it touched a high of 61.42.

Next week, the foreign exchange market will be open only on Monday, Tuesday and Wednesday. Because of this, currency traders expect thin trades.

“The results of Maharashtra and Haryana elections will be out on Sunday. If the Bharatiya Janata Party wins, then it will be very positive for the currency market,” said Sandeep Gonsalves, forex consultant and dealer at Mecklai & Mecklai. He expects the rupee to trade in the range of 61-62 next week.

Meanwhile, Citi maintains its view that the rupee could stay in the 59-62 range in the near term. According to a note to clients by Rohini Malkani of Citi, released last week, the Reserve Bank of India might further liberalise the bond markets if a need is felt to augment capital flows.