Mumbai: After registering its best quarterly performance since September 2012, the Indian rupee is unlikely to stage a major rally from the current level against the US dollar as forex participants feel that the local currency is already overvalued and the RBI could intervene in the open market to check further gain that could seriously hurt the margins of Indian exporters.
The Indian rupee closed at 64.85 per dollar on Friday, its highest level since October 2015. According to IFA Global, a forex and treasury solution firm, the Indian rupee is the third best performing Asian currencies this year, up 4.63 per cent in the March quarter, its best quarterly gains since September 2012.
A persistent flow of funds from overseas investors in domestic debt as well as equity markets, softening of global crude oil prices and improving macro fundamentals have favoured a rally in local currencies.
“There are couple of domestic and global factors that are lending strength to the local currency. While the policies proposed by Donald Trump in US actually favours a strong dollar, Mr Trump has made it clear that he is personally not in favour of a strengthening dollar. This has capped a major upside in US dollar index,” noted Nitin Nachnani, manager, forex and rates department, Edelweiss Securities Ltd.
According to him, the impressive victory registered by BJP in the recently state assembly polls led to a sharp surge in the value of local currency, which breached its key psychological resistance level of 66.06 per dollar, gaining close to 70 paise in a single day.
“Lot of exporters and big corporate with unhedged foreign exchange exposure were caught off-guard. There was a rush among exporters to hedge their outstanding open position. This triggered further rally in Indian rupee. Additionally, the softening of the WTI crude oil prices further helped the rupee to rally higher,” he added.
According to forex observers, the RBI was seen intervening in the market last week when the rupee crossed 64.90 and 64.80 level mark, which suggests that the Central Bank would not allow the local currency to appreciate too much from the current levels.