Rupee seen trading at 84 per US dollar by end of year, says Nomura

The rupee is expected to appreciate from its present level to trade around 84/$ by the year end on the back of a softer dollar, Nomura said in a report. The Indian unit settled at 85.27 a dollar on Thursday, up 15 paisa over the previous close.

 

“Our view is that because of this softer dollar backdrop, and actually an asset market is looking relatively healthy, if you want to say the potential capital inflow to go through, we are actually thinking about dollar–INR can be around 84 by the end of this year,” said Craig Chan, global head of foreign exchange strategy at Nomura Securities.

 

 

“The reason being is, I do think that there will be quite active purchasing dollars that come through, cleaning up of the forward group that will come through from RBI, plus the potential for some reserve accumulation,” he added.

 

The Reserve Bank of India’s (RBI’s) outstanding net short dollar position in the forward market rose further to $88.7 billion by the end of February, against $77.5 billion at the end of January. Of the $88 billion net short dollar position, $14.7 billion was in one-month contracts, and $18.8 billion was in one-to-three-month tenure. The largest amount of $45 billion in swaps was spread across three-month and one-year tenures. The remaining $10 billion in swaps was of more than one year. Additionally, the real effective exchange rate (REER) of the Indian rupee continues to moderate, falling to 101.49 in March, against 102.37 in February.

 

On Thursday, the rupee depreciated by 25 paisa in early trade but recovered all its losses by the end of the day on the back of technical resistance, to settle 15 paisa higher at 85.27 per dollar.

 

“The rupee changed course because of technical support. The opening was weaker because of the tensions in Jammu and Kashmir, and crude was also up,” said a dealer at a state-owned bank.

 

Brent crude oil prices were up 0.45 per cent to $66.42 per barrel on Thursday.