The Union Bank of India has released a research report indicating that the Indian rupee is expected to receive support against the dollar and trade around Rs 83.57. The report predicts that the rupee will trade in a range of Rs 83.27 to Rs 83.99, with the latter being its all-time low. This positive momentum is expected to be fueled by foreign portfolio investors (FPI) inflows and the general weakness of the US dollar. The report also suggests that the rupee should find support at Rs 83.27 and face resistance at Rs 83.77 and Rs 83.99.
The interest rate cuts implemented by the Federal Reserve are expected to widen the interest rate differential between the US and India. This differential is likely to attract more FPI inflows into India, providing additional support to the rupee. The RBI is expected to maintain its “Withdrawal of Accommodation” policy due to rising food inflation, further contributing to the support of the Indian rupee. The report highlights that this trend is already visible in the RBI’s data on External Commercial Borrowings (ECB) inflows, with Indian firms filing proposals to raise USD 3.58 billion through ECBs in July 2024.
Overall, the report suggests that the combination of Fed rate cuts, the widening interest rate gap between the US and India, and increasing FPI inflows will continue to support the Indian rupee in the near future. This support is expected to keep the rupee trading in a range of Rs 83.27 to Rs 83.99, with the possibility of testing even higher levels if the resistance of Rs 83.99 is breached. It is expected that the rupee will find support at Rs 83.27 and face resistance at Rs 83.77, followed by the crucial level of Rs 83.99.
In conclusion, the research report by the Union Bank of India paints a positive outlook for the Indian rupee in the coming months. With the support of Fed rate cuts, widening interest rate differentials, and increasing FPI inflows, the rupee is expected to trade around Rs 83.57 and continue to strengthen against the dollar. This positive momentum is likely to be sustained in the near future, providing stability and support to the Indian currency.
