Check INR performance vs major currencies; main factors for the rupee include dollar liquidity and i

The three main factors that will determine the movement of the rupee are dollar liquidity, inflation, and central bank policy.


According to Dilip Parmar, Research Analyst at HDFC Securities, the rupee will be protected against significant depreciations if FPIs once again turn net sellers by high-frequency economic data from India, comfortable foreign exchange reserves, and government and RBI actions. Dilip Parmar stated that the general bias for the dollar is optimistic in an interview with Surbhi Jain of FinancialExpress.com. He recommended traders and investors stay on the right side and buy more dollars during any brief dip. He also said that the RBI's strategy, which involves front-loading rate increases while waiting for inflationary pressures to subside, is expected to minimize growth damage. Here are the trimmed passages.

1. If FPIs turn net sellers again, will Rupee freefall resume despite several measures announced by RBI to contain the fall?

Demand-supply imbalances and interest rate discrepancies are invariably what determine how local currencies change. Foreign institutions have made purchases worth $5 billion so far this month, which has helped to stabilize the rupee as it has fallen 0.6% against the dollar while the Dollar Index, a basket of six currencies, has risen 1.69%. If FPIs again turn net sellers, recent high-frequency economic data from India, comfortable foreign exchange reserves, and government and RBI policies will guard against severe depreciation of the rupee.


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