Rupee's Fortunes Depend On RBI's Intent To Prevent Further Weakness: Economists

A fortnightly Reuters poll showed bearish bets on the rupee climbed to their highest since last April, as the surge in infections has halted what had been seen as a promising growth story in the region.

The rupee's near-term fortunes may directly be influenced by the Reserve Bank of India's intent on preventing any further depreciation in the currency as the surge in COVID-19 cases hits jobs and growth, economists and traders said. The rupee has already lost 2.6 per cent against the dollar so far this month, putting it on the cusp of marking its worst month, since the pandemic hit the country early last year. "INR is likely to trade with a depreciating bias on the back of a stronger dollar, relatively weaker EM currencies, muted EM inflows and rising COVID-19 cases in India," said Sameer Narang, chief economist at state-run Bank of Baroda. A fortnightly Reuters poll showed bearish bets on the rupee climbed to their highest since last April, as the surge in infections has halted what had been seen as a promising growth story in the region. The rupee closed at 75.01 to the dollar, and traders say they expect it to stay in the 74.50 to 76.00 range against the greenback in the near-term. India reported 332,730 new daily cases on Friday, the highest single-day tally anywhere globally. Rising cases have been one of the main factors behind the recent fall in the rupee, but the RBI's decision to commit to large bond purchases has added to downside momentum.