There was euphoria in the currency market during the last couple of weeks. This was aided by a positive intent shown by the new RBI governor Raghuram Rajan to boost dollar supply by providing avenues to banks to raise money abroad.

Banks have raised close to $ 1.4 billion from abroad under the swap facility provided by the RBI. This helped the rupee to recover from its all-time low.

The rupee was also aided by a surprising and unexpected move by the US Fed to continue with its stimulus programme and differ tapering.

This helped the rupee to strengthen further to a low of 61.59 last week.

The reprieve was cut short by the RBI’s monetary policy on Friday whereby it made borrowing a little costlier by increasing the repo rate by 25 basis points from 7.25 to 7.50 per cent.

This even as it eased liquidity a bit by cutting daily Cash Reserve Ratio (CRR) requirement from 99 per cent to 95 per cent and reducing the Marginal Standing Facility (MSF) rate by 75 basis points to 9.5 per cent.

This move by the RBI to contain the rising inflation, was immediately thwarted by the markets, which gave a thumbs down and traded lower.

We did see some recovery in the later part of the day, after Rajan clarified his stance but it left India Inc wanting more.

Foreign Institutional Investors (FIIs) have been net buyers in the Indian markets during the last couple of trading sessions, buying close to $1.5 billion in the Indian equity markets.

This has helped the rupee to strengthen and we expect FIIs to invest more in the Indian markets in the days to come.

With European and US economies showing signs of growth, India’s exports will ease current account deficit (CAD) woes a bit, and help the rupee as well.

Moreover, with the Syrian risk easing for the time being, decline in global crude oil prices has eased India's import bill thus aiding the rupee.

All these factors have helped the rupee in the short-term and we will see it appreciating a little more to around 60.50 to 61 levels in the next few days. Technically there is a strong resistance at 61.30 levels and a breach of that could take the rupee to 58.60 levels.

However, a few factors still haunting the rupee are high fiscal deficit forcing the Government to borrow more and the not so encouraging Index of Industrial Production numbers.

Moreover a high external debt of around $ 390 billion of which about $ 172 billion is maturing before March 31, 2014 will affect the rupee adversely in the long-term and we might see it trading above 65 levels.

(The author is Regional Director, Alpari Financial Services (India). The views are personal)

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