The rupee snapped out of a five-session losing streak on Wednesday, closing at 57.79 against the dollar. On Tuesday, it had plunged to 58.98 before ending at 58.39.
Experts said it will be very difficult for the Indian currency to go back to 55-levels against the dollar though it rose to a high of 57.72 during the day on the back of an outlook upgrade by rating agency Fitch. The good news: the volatility is likely to diminish.
In futures markets in India and around the world, the rupee-dollar exchange rate for the period between June 2013 and March 2014 was in the range of 58.12 to 60.30 (see Spot the trend). The futures market is a good indicator of where a currency is headed over a given period.
So, factor in a slight increase in your budget if you're planning to go abroad later this year, or plan to go abroad for studies this fall. And yes, get ready to pay higher petrol and diesel prices very soon.
"The upgrade by Fitch is likely to lend some support to rupee," said Sugandha Sachdeva, currency analyst, Religare Securities. "However, the level of 57.70 is crucial resistance and only if it breaches this level, is it likely to strengthen further. The overall trend is still bearish," she added.
The major reason for the rupee fall is the pullout of money by foreign institutional investors on the back of a recovery in the US economy and the slow pace of growth in India.
Foreign funds have sold more than $3 billion (about R17,500 crore) worth of domestic debt in the last 14 trading sessions and played a key role in pushing the rupee down 4% over this period.