In the short term, coronavirus fears will keep rupee on an edge and we can expect USD/INR spot to remain within 71.30-71.75, says Rahul Gupta, Head of Research-Currency, Emkay Global Financial Services.
The Indian rupee has extended the morning gains and trading higher at 71.15 per dollar, with buying seen in the domestic equity market.
It opened higher by 15 paise at 71.21 per dollar versus previous close 71.36.
On February 4, the rupee erased the early losses to end 3 paise down at 71.36 against the US dollar, tracking recovery in domestic equities and easing crude oil prices.
The dollar held firm on Tuesday after a key US manufacturing survey showed a surprise recovery, while concerns about a widening coronavirus outbreak in China kept the yuan and the Australian dollar subdued.
“As expected the government missed its FY20 fiscal deficit target of 3.3% by 50 bps to 3.8% and has estimated the FY21 target to 3.5% of GDP. Also, the gross borrowing for next fiscal (FY21) has been increased to 7.8 trillion which was in line with what market estimated, while kept unchanged for FY20," said Rahul Gupta, Head of Research-Currency, Emkay Global Financial Services.
"The bond market had priced the slight diverge in fiscal-deficit-management. Thus, we saw a sharp fall in 10-year bond yields. Meanwhile, the global concern that fast- spreading coronavirus may hamper global growth led to a gap-up open in USD/INR spot."
"Also, this week we have RBI policy, we expect the central bank to stand pat at 5.15% with accommodative stance, the commentary on inflation and growth forecast would be keenly watched. In the short term, coronavirus fears will keep rupee on an edge and we can expect USD/INR spot to remain within 71.30-71.75," he added.
Oil prices rose on Tuesday, matching moves in other financial markets as investors regained calm after Monday's sharp sell-off on fears of the impact of the China coronavirus on demand sent crude to its lowest level in more than a year.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.
