Geo-political tensions to mount pressure on rupee: Experts

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Mumbai : Geo-political tensions between US and Turkey, along with fears of a rise in protectionist measures and outflow of foreign funds are expected to mount pressure on the Indian rupee in the coming week, experts said on Saturday.

"Last week was exceptionally volatile, due to Turkish crises and Chinese Yuan devaluation. However, things have calmed down a notch on Friday, due to upcoming dialogue between Chinese and US representatives on trade, to be held in US by end of August," Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, told IANS.

"However, S&P has downgraded Turkey to B+ and warned that risk remains elevated for a recession next year as well as hard landing for the financial sector. As a result, we can see renewed pressure on Lira next week. However, RBI intervention may keep the rupee supported. As a result, we expect a range of 69.50-70.50 on spot for the next week."

The RBI is known to enter the markets via intermediaries to either sell or buy US dollars to keep the rupee in a stable orbit. This type of intervention has been blamed by analysts to cause a decline of $1.82 billion during the week ended August 10 to $400.88 billion from $402.70 billion reported for the week ended August 3.

According to Anand Rathi Shares and Stock Brokers' Research Analyst Rushabh Maru said: "Even though India's CPI and WPI have eased in July, this is just a temporary phase. Sharp depreciation in the rupee and higher crude oil prices may once again push inflation higher. The US dollar index is trading around multi-month high levels."

"Focus would now shift to the FOMC monetary policy minutes due next week, as well as the US Fed Chairman Jerome Powell's speech at the Jackson Hole Symposium."

Apart from global cues, any further outflow of foreign funds from the Indian equity and bond markets might have an adverse impact on the rupee.

In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors sold scrip worth Rs 2,028.47 crore in the domestic equity market during August 13-16.

In recent days, geo-political developments, wider trade deficit, along with outflow of foreign funds have pulled the Indian rupee to fresh record intra-day and closing lows.

On Thursday, the Indian rupee plunged to an intra-day level of 70.39-40 -- its lowest ever mark -- against the greenback prompting some automobile manufacturers and other import dependent sectors to raise prices.

It settled at a record closing low of 70.16 against the US dollar on Thursday.