The rupee is expected to strengthen against the dollar tomorrow, with the United Progressive Alliance government winning the Lok Sabha vote on foreign direct investment (FDI) in the multi-brand retail sector.
"The rupee is expected to appreciate in early trades on Thursday from current levels and it may trade in the range of Rs 54-54.5 per dollar during the day," said S Srinivasaraghavan, executive vice-president and head-treasury at Dhanlaxmi Bank. The Street is expecting dollar inflows to drive the movement.
The rupee ended at Rs 54.56 against the greenback, compared with yesterday's close of Rs 54.69. The currency had opened at Rs 54.53 and traded in the range of Rs 54.45-54.66. This was an up-move for a second day, due to investors' hopes of Parliament approving the FDI move, said Sandeep Gonsalves, foreign exchange consultant and dealer, Mecklai & Mecklai.
There were some demand from oil importers for the greenback but dollar flows by foreign instutitional investors, banks and information technology companies helped the rupee, he said.
The rupee is also expected to appreciate in the medium term, "due to the oil-led improvement in the trade deficit and current account. The real effective exchange rate is close to the bottom of its band and we think that over the next few years, it will likely trade above the mid-point," said Tushar Poddar, managing director and chief India economist at Goldman Sachs. Goldman's three-month, six-month and 12-month Rs /$ forecasts are at Rs 55, Rs 53 and Rs 52.