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What is the story about?
The Indian rupee could strengthen to 95 against the US dollar over the coming months if Brent crude remains below $100 per barrel and foreign inflows continue, according to Anindya Banerjee, Head of Research – Currency, Commodity and Interest Rate Derivatives at Kotak Securities.
He said the rupee could appreciate further to 93 in an aggressive scenario if the Reserve Bank of India (RBI) allows Foreign Currency Non-Resident (Bank) (FCNR(B)) inflows to fully reach the spot market.
Banerjee said the FCNR(B) deposit mobilisation has already matched the level seen during the 2013 scheme, and he now expects inflows to exceed his earlier estimate. "We had initially thought $50 billion, but it could cross that number," he said, adding that the final weeks of the scheme typically see stronger inflows. The FCNR(B) deposit window remains open until September 30.
The currency strategist said lower oil prices, foreign portfolio investment inflows and FCNR(B) deposits are creating conditions for the rupee to appreciate, noting that foreign portfolio investors have already brought in around $4.5 billion during July.
Exporters have been delaying dollar conversions in anticipation of better exchange rates, while importers have been increasing hedging activity. If stronger inflows are allowed into the market, exporters may accelerate conversions to avoid missing a stronger rupee, he said.
Crude oil, however, remains the biggest risk to the outlook. "The wild card is the oil," he said.
For the full interview, watch the accompanying video Catch all the latest updates from the stock market here
He said the rupee could appreciate further to 93 in an aggressive scenario if the Reserve Bank of India (RBI) allows Foreign Currency Non-Resident (Bank) (FCNR(B)) inflows to fully reach the spot market.
Banerjee said the FCNR(B) deposit mobilisation has already matched the level seen during the 2013 scheme, and he now expects inflows to exceed his earlier estimate. "We had initially thought $50 billion, but it could cross that number," he said, adding that the final weeks of the scheme typically see stronger inflows. The FCNR(B) deposit window remains open until September 30.
The currency strategist said lower oil prices, foreign portfolio investment inflows and FCNR(B) deposits are creating conditions for the rupee to appreciate, noting that foreign portfolio investors have already brought in around $4.5 billion during July.
Exporters have been delaying dollar conversions in anticipation of better exchange rates, while importers have been increasing hedging activity. If stronger inflows are allowed into the market, exporters may accelerate conversions to avoid missing a stronger rupee, he said.
Crude oil, however, remains the biggest risk to the outlook. "The wild card is the oil," he said.
For the full interview, watch the accompanying video Catch all the latest updates from the stock market here
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