Rupee Can Appreciate Against Dollar In Near Term, Here's Why

The Indian rupee can see further appreciation against the US dollar in the near and mid-term, led by chances of an improvement in global geopolitics and evolving economic conditions in the US.

The rupee appreciated to the highest in a month against the greenback on Tuesday, led by positive cues from efforts by US President Donald Trump brokering talks between Russia and Ukraine. While it closed 5 paise weaker against the dollar at 87.1 on Wednesday, analysts believe that the rupee is set to appreciate further.

Sentiments should remain positive over the next two weeks. With positive developments being seen between Russia, Ukraine and the US, the incremental 25% tariffs imposed on India can go and the rupee could appreciate to 86.8 in the next couple of weeks, according to Ritesh Bhansali, deputy CEO at Mecklai Financial.

In the course of a month, the rupee is estimated to appreciate to 86.75 against the dollar, according to Anindya Banerjee, head of currency and commodity research at Kotak Securities.

All parties appear to want a resolution and are looking at closure on the Russia-Ukraine conflict. Also, whatever happens on the global geopolitical front in the next few days or over the course of the month, the rupee is undervalued compared to emerging market peers and has room to catch-up, Banerjee said.

Domestically as well, given the likely reforms in the GST, the backdrop for inflows is being created, while various high-frequency indicators are showing signs of a slowdown and these will likely compel the Fed to cut rates.

The dollar, too, will likely depreciate given that 'America first' can't happen with the dollar at current values, Banerjee explained. He estimates the dollar index to be at 94 this year. Currently, it is hovering above 98.

As such, the INR could appreciate to 85 against the dollar, said Banerjee.