Indian Rupee Marginally Stronger

The Indian rupee commenced marginally higher on Tuesday, June 25, 2013, consolidating from recent losses against US dollar, although it was still lingering close to its record lows. Besides dollar selling by exporters, a higher opening in domestic equity market helped the rupee to strengthen. Investors are now awaiting the release of the current account deficit data on Friday. The domestic currency opened higher by 6 paise at Rs 59.6125 and inched up to hit an intraday high of 59.60 before dropping back to a low of 59.76 so far during the day. In the spot currency market, the Indian unit was last seen trading at 59.7250, weaker by around 6 paise or 0.09% as compared to previous close at 59.67.
Global markets remain weak over worries about the rollback of U.S. monetary stimulus and concerns about China's financial sector. Asian shares slipped further on Tuesday and investors braced for more volatility in Chinese markets as worries spread that tight liquidity could impede China's economic growth and take the shine off an emerging U.S. recovery. Domestic key benchmark indices alternately moved between positive and negative zone near the flat line in morning trade. Foreign institutional investors (FIIs) sold Indain shares worth a net Rs 1552.98 crore on Monday, 24 June 2013, as per provisional data from the stock exchanges. At the time of writing, the S&P BSE Sensex was down 1.44 points or 0.01% to 18,539.45 while the CNX Nifty was down 1.65 points or 0.03% to 5,588.60.
The rally in the U.S. dollar took a breather in Asia on Tuesday after two top Federal Reserve officials downplayed market fears of an imminent end to stimulus, with one saying the Fed's exit strategy was still way out in the future.
In the meantime, Crisil research expects the rupee to strengthen from current levels and settle at around 56 per dollar by end-March 2014. The appreciation will mainly be driven by resumption of FII inflows, which in turn, will be led by two factors. Firstly, the current capital flight from India is a short term phenomenon and is largely in response to the uncertainty surrounding the impact of the Federal Reserve's pullback of QE. Secondly, the government is pledging a slew of domestic policy reforms to shore up domestic and foreign investor sentiments. This will act as a pull factor for foreign capital inflows. And finally, the research firm expects current account deficit as a per cent of GDP to be lower in 2013-14 vis-à-vis last year. The key external monitorable for direction of the currency is the stance of developed countries, particularly the US, on withdrawal of quantitative easing (QE). On the domestic front, pushing through key policy reforms that will revive the economy, bolster investor sentiments and attract foreign inflows will be the key monitorable.
Source by Commodity Insights