Mumbai, Aug 18 (IANS): The Indian rupee is expected to trade in the 79.25-79.75 per US dollar range in the coming days due to easing crude oil prices and continued inflows by foreign investors, the Bank of Baroda said in a research report.
"The global oil price has come down to less than the $100-mark which is good news, as it will automatically lower the trade deficit, besides potential inflationary pressures. Going forward, we may expect the rupee to trade in the Rs 79.25-79.75/$ range," the report said.
The report also said that the Ukraine war, though largely unresolved, has probably played out the darker side with the global economy adjusting to the supply dynamics. The shock has been absorbed in a period of six months, it said.
"Taiwan did ring a scare, but seems to be behind us now. The focus will be on what global central banks do in the coming months and though the direction is clear and a slowdown imminent, the approach will provide further clues to the currency markets," the report said.
The Indian rupee remained volatile for the last two months, touching record lows at times, but recovered from that since start of this month, thanks to the foreign investors who returned to the equity market after nearly nine months.
"The Indian story was largely driven by FPI movements, which turned positive for equity on all days while aggregating positive for debt over this period. Hence the net inflows were positive which made up for the shortfall on trade which was impacted with imports rising faster than exports," the report said.
Experts believe that foreign investors have returned to Indian markets because the country is a preferred destination as it has best growth prospects among the large economies of the world. FPIs have turned net buyers in autos, capital goods, FMCG, and telecom.
The dollar had come close to the parity level and the question asked was whether this level would be broken. Intuitively the Fed hardening interest rates to slow down the economy automatically reduces the strength of the dollar and this has lent a hand to other currencies, the report added.