Mumbai: The rupee has started a downward movement once again since December 9, almost a month after the US elections results were out, as there was a perception that the new government could be more ‘closed.’
This was a shock to the rupee which had strengthened between November 28 and December 8, 2016. It is also expected that the Donald Trump administration will be aggressive with fiscal stimulus to the economy which in turn will raise the spectre of inflation, prompting the Federal Reserve to increase interest rates further, said Care ratings’ chief economist Madan Sabnavis.
Similar concern has been expressed by Dr Arun Singh, lead economist, Dun & Bradstreet India. He said the ambiguity over the implementation of the GST on target date has created uncertainty amongst investors which might impact capital inflows going forward. “This coupled with uncertainly around the global economy, Opec’s decision to cut oil production and hawkish stance by the Fed would exert downward pressure on rupee,” he said.
The US Federal Reserve is expected to raise interest rates twice more in 2017 by between half to one per cent according to some experts after the quarter per cent rise announced by the Fed chief Janet Yellen on December 14.
FIIs head home whenever the Fed raises interest rates and this affects the rupee.
