The rupee is likely to claw its way back to 60-levels this week helped by the recent measures taken by RBI coupled with a weak dollar after US jobs data eased concerns over early withdrawal of easy money by the US Fed, say bankers and analysts.
Treasury officials of various banks see the rupee appreciating to the 60 levels this week. The rupee fell 67 paise on Friday to record closing low of 61.10 against the dollar.
The previous record low closing was 60.72 on June 26. The rupee touched an all-time intra-day low of 61.21 against the greenback on July 8, which forced the central bank to unleash a slew of measures from July 15.
"With non-farm payroll data in the US coming out to be weak, the dollar will remain under pressure," Mohan Shenoi, president for group treasury at Kotak Mahindra Bank, said.
The US non-farm payroll data, which indicates the number of people on the payrolls of all non-agricultural businesses, rose by 1,62,000 in July, but is lower than analysts' expectation of 1,84,000 and compared to 1,88,000 additions the previous month.
Lesser number of people getting new jobs indicates that the world's largest economy is far from recovery and the Federal Reserve has to continue to support the economy for longer time.
US Fed Reserve chairman Ben Bernanke on May 22 had stated that he might start turning off the easy money tap if economic conditions improve earlier-than-expected and put a September-December deadline to begin the tapering.
Later, in June he had said the US Fed would unwind quantitative easing by mid-2014, which led to a massive slide in the rupee which has fallen over 10% in 3 months.
"RBI measures will help rupee to appreciate," Central Bank of India general manager (treasury), Ramesh Singh said.
The rupee is likely to be under pressure in the near term but it will appreciate a little from the current level to around 57.5 against the US dollar by the end of this fiscal, according to research firm D&B.
External market volatility and high Current Account Deficit (CAD) are still weighing on the currency and will keep it under pressure, it said.
"By this calender year-end, rupee is likely to be around $58.5 to $59, while by March 2014 it is likely to be $57.5," global research firm Dun & Bradstreet senior economist Arun Singh said.
To save the battered rupee, which is the worst performing unit among the Asian currencies, the RBI had announced various liquidity measures previous month that helped reduce speculation and rupee volatility.
Since July 15, the Reserve Bank has steeply raised short-term borrowing rates, restricted access to borrowing under liquidity adjustment facility, stipulated higher daily maintenance of cash reserve ratio and undertook open market sales of government securities.
Last week, RBI also tightened hedging norms for foreign institutional investors by asking them to secure mandates from clients for hedging the underlying securities of sub-account investors and holders of participatory notes.
However, some of the market experts see the rupee breaching its record intra-day low of 61.21 this week on concerns over current account deficit and weak domestic market. This had FIIs pulling out from the domestic debt and equities to the tune of about Rs 63,410 crore between May 22 and August 2.
"Pressure on the domestic stocks may be negative for the rupee," said Kotak Bank's Shenoi, who sees rupee trading in a band of 60.40-61.30 this week.
The BSE 30-share Sensex ended in negative zone for eighth day in a row on Friday at 19,164.
"Downward pressure on the rupee will continue. With so much high current account deficit and the state of the stock market, it is difficult to finance the current account deficit," said AV Rajwade, forex and treasury risk management consultant at AV Rajwade & Co.
The current account deficit widened to a record 4.8% of gross domestic product last fiscal, though it has improved massively in March quarter to 3.8% from 6.7% in the previous quarter. It may shoot up again in June quarter on high gold and coal imports.