Covid-19 Variant Omicron Prevents Rupee Appreciation
The introduction of the new Covid-19 variant has put the growth of the rupee on a hold. The virus slowed down household consumption and hampered the Rupee’s appreciation and caused an increase in the trade deficit. This, although being unmotivating for forex traders, was combated with a decrease in crude oil prices. The further movement of the FPI’s (Foreign Portfolio Investments) decision to retract its investments in equities was countered with the IPO’s (Initial Public Offering) inflows, this was done to help lessen the trade deficit.
The virus continues to take effect on the rupee as it has created tremendous amounts of uncertainty about growth in markets. The movements of the fund inflows, dollar index and crude oil prices are and have been influenced by the introduction of the new variant of the COVID-19 virus. This has stifled the Rupee’s growth and it is predicted by the Deputy Head of Retail Research, HDFC Securities Devarsh Valik, that it’s value will fluctuate between 74.70 to 75.70 against the US Dollar.
Forex traders are keenly anticipating the RBI’s policy statement to face the markets increasing inflation. Experts predict that they may reverse the repo rates (interest rate of a central bank for commercial banks) from the low of 3.35%, to help reduce inflation. The RBI’s governors are likely to make decisive actions to not allow any further depreciation of the rupee. This will benefit the traders and Rupee as it will limit any rise in the USD vs INR trade.
Written with input from the Times Of India
Written By: Arjun Kulkarni