Expect Rupee to test 54.00-54.50 mark: Nirmal Bang

A late recovery helped the Indian rupee gain on Friday, as demand for global risk assets recovered after the euro extended gains on the back of falling yields for Italian and Spanish debt. However, the local currency still posted its third straight weekly decline as concerns about the global economy continue to weigh, especially after the Federal Reserve and the European Central Bank refrained from immediate action this week.

In India, the summer drought declared on Thursday is raising worries about food price inflation, and is exacerbating fears the government will delay meaningful fiscal reforms that are seen as key to the outlook for the rupee. State-run Hindustan Petroleum (HPCL) has made its first payment for Iranian oil in rupees to partially settle its bill for a cargo imported in May, company officials said on Friday, a move that will help New Delhi fix its trade imbalance with Tehran.

The rupee is likely to open strong in line with the rise in euro after the release of US jobs report on Friday. We expect to rupee to remain strong as the global risk appetite is likely to support rupee going forward. The expectations of further inflows backed by further monetary easing in the developed markets will address some concerns on Balance of Payment front. We expect rupee to test 54.00-54.50 in short-term.

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