Rupee may depreciate further, to be in range of 67-71/USD

The rupee is expected to depreciate further and be in range of 67-71 against the US dollar, but still it will fare better than most of the emerging market currencies, says a report.
According to Kotak Institutional Equities, global policy divergence would strengthen the dollar dominance against other G-4 majors in the coming months.
Moreover, market adjustment to the Fed and US political realities, among others will likely position investors against emerging markets, the report said.
"Factoring in possible realignment of global risk appetite along with expectations of further accommodation by the RBI, we expect INR to depreciate further and be in the range of 67-71 against USD," Kotak Institutional Equities said in a research note.

However, even as the rupee weakens, its relatively strong macroeconomic fundamentals should lead the currency to fare better than most of the emerging market currencies.
Rupee today tumbled by 42 paise to 67.85 against the dollar due to appreciation of the American currency globally as the US Fed hiked interest rate by a quarter percentage point and indicated more to come next year.

Regarding the FOMC raising the Fed funds rate by 25 bps, the report said, investor aversion for emerging market assets may continue as markets adjust to Fed moves.
The Federal Reserve has increased its key interest rate by 0.25 per cent for the first time in a year in response to a strengthening US economy.

This is only for the second time in a decade that the Fed has raised its rate. The other one was in December 2015.