INR vs USD: On account of Chinese equity gains lifting the morale of the Asian indices, the Indian Rupee is expected to remain strong and trade in the range of 74.90 to 75.25 range. According to the currency experts, if the RBI stops buying Dollars as it has been doing in the past three months, then rupee may further gain ground up to Rs 74.60. They said that the current gains in the rupee have been fueled by the rise in Chinese equity markets that has lifted the Asian equity indices.
Speaking on the Rupee vs Dollar deviation, Anindya Banerjee, Deputy Vice President at Kotak Securities said, “It is a risk in Asia, as Chinese stocks continue to surge higher. It is believed that Chinese authorities could be fanning a reflation in the stock market, with the hope that the wealth effect stokes the consumption boom. However, in reality, household consumption is anaemically low in China and post Covid it may be even lower (as a share of GDP). The effort to boost consumption via equity market reflation may cause medium term harm, when the bull run deflates. For now, what is positive for Chinese equity market is turning out to be positive for Asian equity and Asian currencies as well. This augurs well for Rupee. NDF (National Dollar Flow) is showing a lower open in July futures, possibly around 76.000/05 zone. The pair has been artificially propped by alleged central bank buying in the forwards.”
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Banerjee said that if the Central Bank steps in today as well, then USDINR July futures may remain within a range of 74.90 and 75.20/25 zone. Nevertheless, if the pair slips below 74.90 and sustains, then play short for a target of 74.60/65 levels.
Highlighting other triggers helping Rupee to gain ground against Dollar, Anuj Gupta, Deputy Vice President — Commodities & Currency Research at Angel Broking said, “Apart from the Chinese equity there are some fundamental triggers that will help Rupee to remain stronger against the dollar even when the Chinese equity loses its sheen. Those important fundamental triggers are Indian Forex Reserves at a very high level, Indian imports going down, Indian government focusing more on the self-reliant economy and weakness in Dollar Index.” Gupta said that Chinese equity gains are helping the Indian currency to gain against the American Dollar at a faster rate only.