Currency Review: Is The Rupee Headed For A Further Fall?

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    The rupee has consistently been weakening over the last few days. There are worries that rising crude prices may hinder any recovery that is expected in the rupee.

    Currency Review: Is The Rupee Headed For A Further Fall?
    Through the entire week, there was buying in the dollar, pushing the Indian currency lower. There seems to be very little hope of a sharp recovery. The one major event that the currency markets would watch is the Karnataka elections.

    Should the NDA fair badly in the elections, be rest assured that the rupee would weaken a tad bit more, then is anticipated.

    The worry for the rupee at the moment remains crude oil. India imports bulk of its crude requirements and this is where there are worries. Brent crude has flared to $75 a barrel, following US President Donald Trump's decision, not to continue with the Iran nuclear deal. This means that we could see a further rally in crude prices, which is not good for the rupee.

    Weak FPI inflows

    Another cause for worry is the weak inflows from Foreign Portfolio Investors. In fact, FPIs have been consistently selling in the Indian markets over the last few weeks. In the past, heavy inflows from these set of investors have lent support to the rupee. However, following the Union Budget 2018, there has been consistent selling from these set of investors. This is not good news for the rupee. Through the entire week they have consistently sold into Indian stocks in the cash market.

    If this trend continues, we might see further drop in the rupee.

    All in all, if you are taking long positions in the dollar in the currency futures market, you could probably be a winner. Hold onto the dollar for some gains in the coming weeks. The rupee ended at 67.33 to the dollar. 

    Expect currency markets to remain volatile through the week. Check Indian rupee rates against other currencies here

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