Rupee hits one-year high of 65.4: Where is it headed?

Rupee hit a one-year high of of 65.4 against the USD, up 29 paise over its previous close. With a rally of over 3.4% in calendar year 2017, the rupee is the third best performing currency in Asia against the USD (sixth best among key world currencies) , behind South Korean Won and the Taiwan Dollar that have appreciated 5.44% and 4.95%, respectively. The recent appreciation in the rupee, analysts say, has mostly been fuelled by the gush of liquidity into the equity markets by foreign institutional investors (FIIs) in the hope of accelerated pace of reforms post Narendra Modi – led Bharatiya Janata Party’s (BJP’s) landslide victory in assembly polls in the key state of Uttar Pradesh, which was being dubbed as a semi-final to the general elections in scheduled in 2019. Nifty Trading Tips

“The turning point for the rupee has been the recent assembly elections. The rupee was expected to depreciate against the USD. If you look at the fundamentals, oil prices have slipped to $50/barrel levels. That apart, the FII flows have also started to increase. Thirdly, there is some speculative element also at play. Given this, the rupee is expected to strengthen. This is one reason that the RBI has approached the banks to check the rupee’s appreciation. Though the recent trade data is a statistical mirage, it can add to the rupee’s strength,” says Madan Sabnavis, chief economist, CARE Ratings. Year-till-date (March 16), foreign institutional investors have pumped in around Rs 23,007 crore in the Indian equity markets, NSDL data show. In the two days post the election outcome alone (on March 14 and 15), FIIs have invested a net around Rs 4,981 crore in the equity segment, NSDL data show. Future & Option Trading Tips