Rupee Rebounds as Dollar Sales from Exporters Surge

Traders pointed to dollar sales by exporters as the rupee increased somewhat on Thursday. However, solid gains were not anticipated amid the holiday calm and risk aversion in broader markets. By 10:05 a.m., the rupee had climbed to 82.78 per dollar. After firming up to 82.75, I settled on AST. On Wednesday, the currency finished at 82.8575.

The activities of exporters holding their dollars will likely intensify as the quarter ends. Still, due to the absence of a substantial number of market participants, the transactions will stay rangebound, according to a foreign exchange dealer. The trader added that the currency’s intraday range should likely be 82.70-82.90.

Despite the Rebound, the Market Remains Risk-Averse

For the last two weeks, the rupee has remained on the 82.50-82.50 mark, with each session limited to modest fluctuations. Analysts think it’s a move to restore the currency’s stability, which fell by around 20% earlier this month.

Several investors think that the Reserve Bank of India was intervening to keep the rupee from depreciating past 83 cents per dollar. Additionally, dollar offers by state-run banks around 82.85-82.90 levels were made during this time. In October, it dipped to an all-time low of 83.29.

However, the dollar index rose to 104.360 on Thursday. This limited gains and pulled down broader Asian markets as currencies and equities dropped.

The fragile health system has been overwhelmed by the speed at which the country has dismantled COVID regulations, raising fears about the virus’s spread.

What Is Rupee’s Fair Value?

Amit Pabari is the Managing Director of CR Forex Advisors. According to him, the weakening USD versus EM and DM FX, declining crude prices, easing US yields, and consistent local fundamentals will eventually result in a favorable move towards 81.50-81.20 levels in the near term. It might drop to 80.50 in the medium term if it breaks below 81.20.

On the other hand, RBI’s “Main hoon na” (intervention) strategy will prevent the rupee from depreciating much beyond 83. Ultimately, the possible answer to the rupee’s fair value question is between 80.50 and 81.50.