Rupee Outlook: Currency May Continue To Exhibit Weakness Against US Dollar

The rupee dropped to a 2-month low in the currency market this week. It finally closed the week at 67.44, a good 70 paise drop over last week's closing.

Sentiments were not too good in the equity and currency markets. New provisions by the Securities and Exchange Board of India, pertaining to Know Your Customer (KYC) guidelines for P-note holders led to selling in the Indian stock markets, which also had some sentimental impact on the currency markets.

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INR

83.322

United States Dollar

P-Note holders invest through SEBI registered foreign funds, and the money is perceived to be generally hot money.

Also, a rise in crude prices affected sentiments, pertaining to the rupee. Higher crude prices, tends to push the import bill, which has an impact on the currency markets.

The rupee next week is expected to show weakness, though it may not test the 68 levels. There could be a rising demand for dollars, given that foreign funds have net sold in the equity markets for the last two trading sessions.

A lot would depend on global sentiments though. There is a referendum in Britain, in which citizens would decide whether they should stay in the Eurozone. This could affect sentiments in the equity market, as also global currency market.

In any case, brace for volatility in the currency markets next week.

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