The rupee is meandering into the senior citizens zone having already touched 60 levels. It is further expected to hover around that level for sometime since there are no significant announcements or policy decisions from the Government. Globally also, almost all emerging market currencies have taken a beating and are trading at an all-time low against the dollar.

There are reasons galore for this uphill climb — Bernanke’s recent announcement of reducing quantitative easing coupled with weakness in the domestic macro economic factors, world economy going through a rough phase amidst fears of unavailability of cheap liquidity, the actions of Bank of Japan resulting in weak performance of yen. On the domestic front, weak macro economic factors such as poor current account deficit numbers, lack of economic policy reforms, and subsequent sell-off by foreign investors from both equity and debt market, took the rupee to 60 levels.

At present, the rupee is looking weak and is expected to make new lows during the next few trading sessions, before recovering a bit on account of profit-booking. There is hardly any chance of RBI intervention in these conditions. It would be better in the long-term for the economy, if the rupee can find its correct levels for trading. This recent rally has also opened up the rupee’s weakness against other currencies. The rupee is trading weak not only against the dollar but has also depreciated against the pound, euro and yen. Pound and euro are expected to trade near 95 and 82 levels against the rupee in the near future, while the yen is likely to trade around 65 levels against the rupee.

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

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