Rate cut hopes to strengthen rupee: Experts

Mumbai: Hopes of a cut in key lending rates by the country's apex bank, along with healthy foreign funds inflow and low crude oil prices, are expected to support the Indian rupee during the upcoming week, experts said on Saturday.

Market observers expect the Reserve Bank of India (RBI) to cut key lending rates on the back of the union budget's fiscal prudence measures, reduction in small savings interest rates and low inflation.

The cut in key lending rates is expected to support the rupee's value in the upcoming week.

The RBI will conduct its first bi-monthly monetary policy review for 2016-17 on April 5.

"Though a 25 basis points (BPS) rate cut is anticipated by market participants, and few even expect a possibility of a surprise 50 BPS cut as well, thereby setting the tone for the new financial year," Hiren Sharma, senior vice president, currency advisory at Anand Rathi Financial Services, told IANS.

"If it does happen, equity reaction will be very positive and can further affect rupee appreciation."

Sharma predicted the rupee to range from 66.20-65.80 to 66.80-67.10 during the coming week. 

"A conclusive break of 66.20 (by close) only can lead the USD/INR pair towards 65.80," Sharma elaborated.

Bansi Madhavani, analyst, India Ratings and Research, told IANS: "Robust FPI (foreign portfolio investor) flows especially in the equity segment as also softness in global dollar strength augurs well for rupee outlook."

"This week, the rupee is expected to continue its strengthening bias even as RBI is expected to reduce policy rates." 

Madhavani informed that a cautious assessment of US economic revival prospects in the FOMC (federal open market committee) minutes may push back expectations of a near-term rate hike and further support rupee over the coming week.

On technical basis, the dollar/rupee pair is seen to have a steady support at 66.10-20 and resistance at 66.80-90. 

"There is also a possible positive divergence in making, so a bounce towards 66.80-90 can be expected," an independent currency analyst told IANS from New Delhi.

During the truncated week ended March 31, the rupee strengthened by 38 paise. 

Analysts attributed the rise in rupee's value on lessened chances of a US rate hike, lower crude oil prices and healthy foreign funds inflow.

The domestic currency markets were closed on April 1, on account of annual closing of accounts of commercial and co-operative banks

On a weekly basis, the rupee gained by 38 paise to 66.24-25 (March 31) against a US dollar from its previous close of 66.62-63 (March 23) to a greenback.