At the interbank foreign exchange market, the rupee opened strong at 76.08 against the American currency but could not hold the momentum and entered negative territory during the session.
The rupee on Friday settled at 74.89/$1 as against 74.8600 per US dollar on Thursday. The partially convertible rupee had started the day at 74.81/$1 and then moved in a range of 74.69/$1 to 74.94/$1.
The noise about a correction in the global equity market has become louder post the indication about a move towards policy normalisation by the FOMC in its last monetary policy meeting. In addition, the energy crisis and subsequent rise in oil prices amid recovery from the pandemic, China’s relentless clampdown on Industries, has kept the equity investors on the edge across the globe.
It is clearly evident that the inherent nature of the Indian Rupee has been to depreciate against the dollar with intermittent corrections and will continue to be so. The major reason for this is the age-old fact that a high inflation rate will continue to reduce the value of any currency; Indian inflation rates like most emerging market economies have been higher than that of the US.
For the coming week, a muted start can be expected in USDINR and it is likely to move in the range of 73.30 – 74.20 levels with an upward bias. Last but not least expect the USD-INR pair to embrace more volatility in the days ahead.
Since the end of March, the greenback, seen as a safe-haven trade, has retreated steadily with optimism about the recovery. But lately that move down seems to have slowed as traders begin to anticipate higher U.S. interest rates coming when the U.S. Federal Reserve reacts to signs of increasing inflation.
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