The rupee is expected to trade higher, according to a report by Motilal Oswal Financial Services.
"Dollar in the last few months has been under tremendous pressure as major central banks either cut rates or introduced stimulus packages. RBI too since the start of this year has cut rates, but since the end of March it has been primarily flows that extended gains for the currency.
In the coming meeting RBI is expected to take a pause, but one more rate cut cannot be ruled in the next couple of meetings. So broadly the central bank is expected to remain dovish but is likely to introduce new measures to support the economy. At the same time, if tension between US and China escalates we are likely to see increased volatility for major currencies," Motilal Oswal Financial Services has stated in its report.
"As far as rupee (Spot) is concerned we expect it to trade higher in the near term following broad weakness in the dollar and could test levels of 74-73.50 but our overall view remains negative for the rupee in the coming quarter. On the lower side for the rupee we expect 76-76.50 to be an important support," the report adds.
According to it, the Indian rupee has sailed through the Covid-19 crisis. "In the last couple of months rupee has been consolidating in a broad range of 74 and 76 despite sharp gains in domestic and global equities. One of the major reasons for the rupee appreciation has been the rush of flows into Indian equities. Fund inflow in the equity segment has been to the tune of $4.9 billion in the last three months and a few big corporates have raised dollars via stake sale. Reliance being the major one has managed to raise over Rs. 1 lakh crore by stake sale in Jio leading to a surge in rupee. If it's been flows that has lead the rupee higher; RBI on the other hand has been intervening consistently to restrict any major appreciation," Motilal Oswal Financial Services has said.