The rupee on Monday rose in afternoon trading driven by a pickup in purchases by domestic oil importers. It looks set to test its next resistance at 52.50.
Worries about the economy in the near term and drying capital inflows were accentuated after Macquarie's Asia hedge fund exited its short positions in single stock futures citing controversial set of proposed tax rules.
The $1.5 billion Macquarie Asian Alpha Fund, one of the top performing in Asia and among just the 30 or so hedge funds managing $1 billion or more in the region, also cut its India long exposure in March, joining a number of foreign investors reducing their holdings in the country ahead of the expected tax rules.
The rupee was last trading at currently at 52.3850/3950, after closing at 52.07/08 on Friday. Many traders expect the Reserve Bank of India (RBI) to intervene around 52.50. The rupee had risen to 52.0150 levels in early trade.
After 52.50, the next level of resistance is seen at around 52.95-53.00, which is 76.4 per cent of the December-February fall.
The rupee is likely to remain weak in the near-term as factors like low capital inflows and high current account deficit are expected to take their toll, industry experts feel.
"Unless structural issues like high current account deficit (CAD) and balance of payment (BoP) situation improve, the rupee is likely to remain weak in the near future," Indian Overseas Bank general manager, treasury, T S Srinivasan said. The currency may touch Rs 53.50-Rs 54 levels against the American dollar in the next two months, he said.
While the CAD is likely to touch 4.3 per cent of GDP in FY12 compared to 2.6 per cent in FY11, BoP is likely to turn negative for the first time in the past three years in FY12.
Earlier, a research note of Religare Macquaire Wealth Management also forecast that the rupee is likely to be under pressure in the near-term amidst weak global demand and sticky imports.
The banking officials also said that the government has to take steps to attract FIIs to finance the widening CAD, which will support the domestic currency.
