Imminent US interest rate hike to pile pressure on rupee: Experts

Mumbai, Dec 5: An imminent US interest rate hike, slow pace of domestic reforms and sliding equity markets are expected to pile pressure on the rupee value in the coming week, experts said on Saturday.

"Going into the US Federal Reserve (US Fed) policy, an EM (emerging market) currency like rupee can remain under pressure against the US dollar," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

"However, we do not expect run-away depreciation as the central bank remains vigilant and ready to intervene."

The chances of a US interest rate hike were heightened after the US Federal Reserves' (US Fed) Chairperson Janet Yellen made hawkish comments indicating a certain hike in mid of the current month.

On Wednesday, Yallen had said that she is looking forward to a US interest rate hike which will be seen as a testament to the country's economic recovery.

A US rate hike could potentially lead to massive amounts of pullback of foreign funds from emerging economies like India.

In addition, the US dollar will strengthen against EM currencies, gold and other assets classes.

"US central bank is widely expected to raise interest rates by 25 basis points in its mid-December monetary policy. We therefore can see a range of 66.20-40 and 67.40-50 over the rest of the month," Banerjee added.

Besides global factors, negative macro economic data and consistent selling by FPIs (foreign portfolio investors) affected rupee's strength.

"Negative eight core industries (ECI) and purchasing mangers index (PMIs) coupled with consistent selling by the FPIs has had an adverse impact on the rupee value," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

"The FPIs have been consistently selling since March and until a major breakthrough takes place to get the GST (goods and services tax) bill passed, the trend is expected to continue."

However, on a weekly basis, the rupee gained six paise at 66.70 to a US dollar (December 4) from its previous close of 66.76 (November 27). However, it had dipped to a 27-month low of 67.01 on Friday.

The value of the Indian rupee has been dented due to selling spree in the Indian debt and equity markets by foreign funds.

The National Securities Depository Limited (NSDL) figures showed that the FPIs sold Rs.3,362.77 crore or $503.32 million in equity and debt markets from November 30 to December 4.

The data with stock exchanges showed that the FPIs sold stocks worth Rs.3,447.17 crore in the period under review ended December 4.

The FPIs have taken out Rs.23,352 crore during the period August-September. In November, the foreign investors have off-loaded stocks worth around Rs.9,000 crore.

Furthermore, the rupee is expected to open Monday's trade weaker as a key US macro data -- the non-farm payrolls figures showed healthy growth in November said Hemal Doshi, chief currency strategist, Geofin Comtrade.

The data showed the US economy created 211,000 jobs last month against expectations of 200,000 payrolls.

IANS