The rupee on Thursday (June 17), slipped to a 7-week low, touching the Rs 74 per dollar mark. Meanwhile, the US dollar index went to 91.85, which is the single biggest one-day rise since March 2020.
Mitul Kotecha, Senior EM Strategist at TD Securities, said that there is potential for the rupee to weaken further from the current levels.
“Rupee was around Rs 75 per dollar in April. So, there is still potential for it to drop even further from these levels. There will be some comfort around current levels, and some consolidation is likely in the weeks ahead,” he told CNBC-TV18.
According to Kotecha, the Reserve Bank of India (RBI) is not particularly keen to have a strong rupee in order to aid recovery.
“I don’t think that the RBI is particularly keen on having a strong currency. I think there is a desire to support the recovery process via trade and a weaker currency is going to help it to some extent on the trade front,” he said.
He also expects the dollar to be supportive in the near term. “I think in the near term, the dollar will still be supportive, but I think some of this upward move is going to lose momentum. The thing to look at here, is the fact that nominal US yield has actually dropped. So, when you look at US treasury yields, we have seen a decline and that might just lose or undermine some of the support for the US dollar,” he said.
He is expecting the dollar index to top around 93 levels and bottom at 91.50-92.50 range. “The top on dollar-rupee could be around Rs 75 per dollar and if we drift back lower, dollar-rupee may be around Rs 73.50 per dollar level”, he added.Watch the video for more.