Notwithstanding the high crude prices, the long term bias of the rupee is to appreciate, say experts, as the local currency becomes one of the favourites for long carry trades, and inflows pour into high yield Indian assets.
The pressure on the rupee eased a bit on Wednesday as crude prices softened, but experts said this friction would continue for some more time. Two-way price movement can be expected in the rupee as international crude prices rise and fall.
However, going by the real effective exchange rate basis, the rupee is still overvalued and experts say it can technically depreciate to 77 or 78 a dollar if it has to find its right level. However, the central bank may not want to see such sharp depreciation in the rupee as the oil bill would rise, stoking inflation.
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