Healthy macros and vax figures to strengthen rupee

In the next week, the Indian rupee will be strengthened by healthy macro-economic industrial output and a rapid nationwide vaccination drive.

Given the prospect of higher economic growth, macros that are healthy will be more attractive to foreign capital on the equity markets.

The announcements regarding tapering may have halted the trend.

Experts believe that this announcement could drive FIIs from India away to more lucrative markets within the developed countries.

Inflows of healthy FII funds have boosted India’s stock market and rupee in recent months.

“Rupee will take cues form global markets and tapering new buildup,” stated Sajal Gupta Head, Forex and Rates, Edelweiss Securities.

“Domestic IIP growth numbers and domestic IIP were positive. Vaccination is also moving at a rapid pace. The inflows have been slowed by the IPO market’s decline over the past few weeks. Rupee closed previously at 73.50 per greenback on a weekly basis.

“After a brief bout of dollar short-covering last week, we expect that the greenback will head lower this week. Devarsh Vakil (Deputy Head of Retail Research at HDFC Securities) stated that the Fed will taper slower than previously expected due to weaker economic data like jobs reports.

The rupee will strengthen due to strong economic growth numbers from India, strong tax collections and the stimulus given to exporters. Vakil also expects that the rupee will remain within a narrow range between 72.9 and 74 in the coming week, with an appreciation bias.

Gaurang Somaiya (Forex & Bullion Analyst at Motilal Oswal Financial Services): “Next week, the inflation numbers will be published and there is a possibility that the price might be higher than the previous month.” Market participants will also keep an eye on fund flow activity to help determine the trend for the currency. Inflation, industrial production, and retail sales numbers will all be closely monitored in the US. He also mentioned that volatility in US dollars has increased in recent years and that these economic numbers will give further insight into the state of the economy.