Mumbai: The rupee, which rebounded by a massive 135 paise last Friday, may continue to gain this week as investors hope government and Reserve Bank will make more efforts to stabilise the market, say treasury heads of banks.
The domestic currency, which touched an intra-day low of 65.56 on August 22 on fear that the US Fed was on course to taper off its monthly asset purchase programme, recovered sharply on August 23 to end at 63.20 after the pep-talk by the finance minister on CAD and fiscal deficit. So far this fiscal, rupee has lost close to 20 percent.
"The rupee should continue with the Friday's trend of appreciation this week also. Investors hope the government and RBI are committed toward curbing volatility in the forex market," said Srinivasa Raghavan, treasurer at Dhanlaxmi Bank.
Finance Minister P Chidambaram and senior ministry officials met top bankers and overseas investors over the weekend here and discussed fund-raising plans apart from allaying the fears of FIIs over capital control.
After the meeting, Financial Services secretary Rajiv Takru told reporters that the measures to attract fund flows would be announced within a week or so.
Economic Affairs Secretary Arvind Mayaram, who also accompanied Chidambaram, said, "There is no need to get excessively worried about funding CAD given the robust FDI inflows, which grew 70 percent in Q1 year-on-year to USD 9 billion.
"So, we think investment will begin to pick up and therefore one needs to continue to watch and see how we can get stability back on the rupee front."
He also said outflows would be more than compensated by strong inflows.
Last week, Chidambaram had said the rupee was undervalued and has overshot appropriate levels.
He also asserted there is no need for excessive and unwarranted pessimism.
Mayaram told reporters here that government was taking many structural reforms to finance the current account deficit and boost investors sentiment.
"These reforms will begin to show results in the current year itself and we are hopeful that this will have a reflection on the growth that happens in the next three quarters," Mayaram told reporters.
Outgoing RBI governor D Subbarao had said on Thursday that the forex reserves were enough to manage current situation of declining rupee, and RBI would take more measures to curb rupee volatility as and when necessary.
However, some market participants expect the rupee to be range-bound and trade in the 62.50-64.50 level this week. "Fed concerns are here to stay. We may see RBI coming in on the rupee fall, but their presence may not be that strong as it was last week," said Agam Gupta, managing director and head of fixed income trading at Standard Chartered Bank.
"Also, any fall to 64.50 will see exporters selling dollars," Gupta added.
Dealers also expect that month-demand from oil importers may also weigh on rupee this week.
First Published: Sunday, August 25, 2013, 16:05