Rupee seen firm as risk appetite improves

The rupee is expected to benefit as traders move out of safe-haven investments on the hope that the Group of 20 (G20) finance ministers would firm up a bailout plan for the debt-stricken euro zone.

The Indian currency had lost 0.22 per cent last week and ended at 49.13 against the dollar on Friday. The rupee-dollar pair is seen trading in the range of 48.75-49.50 this week. According to the Bombay Stock Exchange, there have been net fund outflows of Rs 817.75 crore in this month so far.

“Risk appetite may get a boost if there is a positive outcome of the meeting of the finance ministers and central bank heads of G20 nations in Paris over the weekend,” said a forex dealer with a Mumbai-based public sector bank.

 

Market participants said better dollar liquidity would help arrest volatility in rupee exchange rate but domestic demand for the greenback would keep the pressure on the rupee. “Gains for the rupee may be limited due to demand for the dollar from oil-importing companies,” said Sandeep Gonsalves, forex dealer and consultant, Mecklai & Mecklai.

The dollar index against six major currencies was at 76.62, compared to the close of 78.72 a week ago. “The sharp fall in the dollar index has taken into account the recent positive developments in the euro zone and the belief that worst is already behind and the best is out of sight,” said Moses Harding, head-global markets group, IndusInd Bank.

In the forwards market, rates may move up this week on demand from banks. There are expectations that the Reserve Bank of India would raise policy rates in the half-yearly review scheduled this month. The central bank has raised rates a dozen times since March 2010 in order to tame inflation.