Basics to keep rupee stable trump over global factors

“Rupee has emerged as a low beta asset amongst the major Asian currencies, exhibiting relative stability,” says Bansi Madhavani, Analyst at India Ratings and Research. 

“This resilience is likely to continue going forward, keeping it anchored on account of domestic fundamentals,” she adds. The surprise victory of Republican Donald Trump in the US Presidential election, along with the Indian government demonetising Rs 500 and Rs 1,000 currency notes, have taken a toll on the rupee. 

The massive political and economic changes plunged the country’s stock markets by over 1.5 per cent for the week ended November 11, and depreciated the currency by 56 paise to 67.26 against a US dollar from last week’s close of 66.70 to a greenback. 

While Trump’s victory bumped up the dollar index and pushed up the US bond yields, it also drained foreign liquidity from emerging markets such as India. The provisional figures from the stock exchanges showed an outflow of Rs 3,923.92 crore in foreign funds. Figures from the National Securities Depository (NSDL) disclosed that foreign portfolio investors (FPIs) were net sellers of equities worth Rs 1,670.71 cr, or $250.47 million from November 7-11. 

Experts say the RBI is expected to anchor the currency through its interventions, as risk aversion sentiment and Foreign Currency Non-Resident (FCNR) payments willkeep the rupee under pressure. “We expect RBI intervention to continue over the remainder of November,” Anindya Banerjee, says AVP, Currency Derivatives with Kotak Securities. “Once bulk of the FCNR payments end by November, we can expect a more handsoff approach from the central bank.” The chances of a rate hike in the US under the new US administration and fears over protectionist measures can dent the Indian currency,” he adds.