Where Is The Rupee Headed?

Up to 45.50/60 before dipping

MADAN SABNAIS

Economist,

Larsen & Toubro Ltd

The appreciation of the rupee has been as enigmatic as the continuous decline in interest rates in the last year or so.

Is the value of around 45.71-72 per dollar expected in the next few months? Or, is it time for a turnaround?

There are really four sets of factors which could bring us closer to an answer. The first pertains to fundamentals, which include trade deficit, invisible receipts, foreign institutional investor(FII) flows, foreign direct investment (FDI) funds and non resident Indian (NRI) deposits.

The others are Reserve Bank of India (RBI) actions, euro-dollar relationship and market expectations.

 

The trade deficit has certainly not added to the forex inflows this year. Invisible flows through software receipts are playing their part, albeit in moderation.

The main driver