Rupee may weaken to 68-69 levels by December 2017. Here's why

When most currency experts are giving a call that Indian rupee could be fairly valued, but with a slight strengthening bias, brokerage firm Edelweiss expect rupee to weaken to 68-69 a dollar level by December on global political risk and strengthening of the US dollar. December is still some nine months to come and indeed the factors mentioned could materialise, pulling down rupee beyond its record low of 68.85 a dollar that it reached on 28 August, 2013. The rupee, for now, seems to be bullish. The recent move by the rupee was so strong that it triggered margin calls on many trading books and the Reserve Bank of India (RBI) had to heavily intervene to iron out volatility. The rupee had moved from 66.61 a dollar to 65.82 a dollar on 14 March, a movement of 1.19 per cent, reacting to huge win of the Bharatiya Janata Party in the Uttar Pradesh elections. At 10.40 am, the rupee was trading at 65.11 a dollar.  Astrology and Numerology Trading Tips

“The rally in rupee reached higher levels post prudent budget, muted impact of demonetisation on GDP estimates and historic mandate in Uttar Pradesh to BJP further strengthened the rupee, making it more expensive than other peer currencies. We believe that the recent move in INR is partly frothy and may fade,” Edelweiss said, adding the narrowing inflation differential will be reversed as favourable base effects for India wade off. “Though India’s macro remains stable, its suppressed inflation and differentials could widen causing INR to depreciate from current levels. We believe that INR may not be over-valued but it appears to be over-heated,” wrote Sahil Kapoor, chief market strategist and Shobana Krishnan, an economist of Edelweiss. According to the report, real effective exchange rate (REER) of rupee shows it is quite expensive against the basket of currencies it is measured. REER is measured as the relative strength of rupee against its trade partner. Indeed, between March 2016 and February 2017, the REER of rupee has been on an incline. Commodity Trading Tips