Budgetary hopes, global macro-data to steer rupee

Expectations of cheering budgetary announcements, coupled with global macro-data and a rebound in commodity prices are expected to steer the Indian rupee's trajectory in the coming week, experts said on Saturday.

Global-macro data such as the Chinese Forex reserves data expected to be announced on Sunday can make or break the week for all emerging markets (EMs) currencies, especially the rupee.

"Sunday's Chinese Forex data will give an idea about how much has been spent on keeping yuan and the Chinese markets liquidated. If a positive set of numbers come out, then we can expect a rally in all EM currencies, especially the rupee," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

According to Banerjee, Friday's US non-farm payroll data will act as an amplifier to the effects of the Chinese Forex figures.

"If it is a positive Chinese figures, then the US data will support the rally, or else it will act as an additional dampener," Banerjee elaborated.

Besides, currency market participants are hopeful that the central government may increase expenditure, announce tax concessions and pave the way to reduce the non-performing assets (NPAs) level of the banking sector.

Expectations are rife that the central government may be able to at least get the new bankruptcy code passed during the upcoming budget session.

"There are expectations from the budget side, especially for announcements on the banking system. Any good news will contain the volatility in the rupee," Banerjee noted.

According to other market observers, rupee's value is expected to strengthen further in-line with a rebound in crude oil prices.

Crude oil prices have slightly edged-up to above $32 per barrel from its recent lows of $26-$27.

"Crude seems to be rebalancing here at current levels. And a price rise can only lift market sentiments going forward. Also, US Fed Advisor's statement that rate hikes will be slow due to global weakness has supported the markets as well," Hiren Sharma, senior vice president, currency advisory at Anand Rathi Financial Services, told IANS.

"Fortunately China markets are closed from February 8-12, and some calmness will prevail. And unless there is a continuity in Yuan weakness, markets will have a breather going forward."

Further, the Chinese Yuan has been holding on a steady trajectory with positive liquidity coming in from the PBOC (People's Bank of China), which has also put in certain restrictions.

Sharma predicted that markets will keenly await for domestic budget.

"We will continue to hold rupee in the range from 68.20/25 to 67.50/30 in very near term," Sharma added.

On a weekly basis, the rupee strengthened by 14 paise at 67.64-65 (February 5) to a US dollar from its previous close of 67.78-79 to a greenback (January 29).

However, the Indian rupee remained weak through-out the period under review. The weakness in the India rupee's value indicates the massive outflow of foreign funds from the equity and debt markets.

The National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) bought Rs.2,568.58 crore or $379.87 million in the equity and debt markets from February 1-5.

In contrast, data with stock exchanges disclosed that the FPIs sold stocks worth Rs.940.71 crore in the week under review.

On technical levels, dollar-rupee pair showed a critical support at 67.50 to a US dollar.

"A rally towards 68.20/25 can be expected. Only a close below 67.50 will lead to fresh selling in USD/INR spot," Hemal Doshi, chief currency strategist, Geofin Comtrade told IANS.