Will the rupee continue to appreciate or head south: Outlook Business 14th April 2017

For the rupee to stay robust, both the current and capital account need to be strong and that doesn’t seem likely. In the current account, we could see a decline in remittances and software receipts. The first would be triggered by falling oil revenues in the Gulf impacting remittances from Indians employed in the region. Further, Trump’s curbing of H1B visas would have a direct impact on software receipts. Besides, as interest rate in the US inches higher, we should see the FPI flows into the Indian debt market ebbing. High interest rates in the US will also scuttle the possibility of external commercial borrowings by companies and higher deposits from NRIs. Further, the RBI would not want the currency at such levels as it will hurt competitiveness of exporters. Over the next six months, we could see the rupee head lower to 66.5.