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The rupee dipped below the 55 levels last week for a day, closing the week at 55.45. This was mainly due to weaker dollar overseas on speculations about third round of quantitative easing by the Fed and also Sensex closing 5% higher last week on talks of infrastructure initiatives and reforms by the government.
We also saw increased optimism in the international asset markets with the 10-year US yields rising to 1.68% after making the historic low of 1.44% last week.
We need to watch the IIP and inflation figures next week and Greece elections on June 17, which will further decide the course of monetary policy on June 18.
As of now, the market is speculating a rate cut of 25 bps due to the poor GDP numbers, but we feel rate cuts will remain a challenge with inflation still hovering close to the 7%-plus levels.
Overall, we expect the US dollar to remain strong in 2012 with the euro moving near the 1.20 levels, pound close to 1.50, yen close to 84 and dollar index moving towards the 85 levels soon. The fundamentals of the rupee still remain weak due to continuous FII (foreign institutional investors) outflows and lack of any policy reforms, which could lead to a sudden sentiment change for India. The rupee maintains strong support near 54.50-55.00 levels and we expect the pair to move towards 56-plus levels again.
We also saw increased optimism in the international asset markets with the 10-year US yields rising to 1.68% after making the historic low of 1.44% last week.
We need to watch the IIP and inflation figures next week and Greece elections on June 17, which will further decide the course of monetary policy on June 18.
As of now, the market is speculating a rate cut of 25 bps due to the poor GDP numbers, but we feel rate cuts will remain a challenge with inflation still hovering close to the 7%-plus levels.
Overall, we expect the US dollar to remain strong in 2012 with the euro moving near the 1.20 levels, pound close to 1.50, yen close to 84 and dollar index moving towards the 85 levels soon. The fundamentals of the rupee still remain weak due to continuous FII (foreign institutional investors) outflows and lack of any policy reforms, which could lead to a sudden sentiment change for India. The rupee maintains strong support near 54.50-55.00 levels and we expect the pair to move towards 56-plus levels again.
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