Emkay Global Financial Services claimed in a report that the US dollar may not decline against other currencies in the near future as the potential for further rate hikes are there and flight to safety during uncertainties.
The report further stated that the Indian rupee may go up due to year-end repatriations and once the supply dwindles, the currency may become weaker again.
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The US dollar has conceded some ground to the other major currencies compared to the levels that were prevailing almost a month back, according to the report as cited by IANS.
The Emkay Global report said that the only exception to the currency to which the USD ceded more ground is the Chinese Yuan.
Against the rest of the lot, the losses are quite limited, and there may not be any severe losses in the near future for two reasons, it said.
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The first is that the potential for further rate hikes in the US is still open, and with inflation remaining stubbornly high the probability of higher rates too is high. In such a situation, the US Dollar may not lose ground,” the Emkay Global report said.
The second and more important factor is — during uncertainties the flight to safety especially to the US Dollar denominated assets is a reality, the company further said.
This preference for high-quality instruments or sovereign risk may prevail for a few more months keeping in view the fluidity in the developments around the banking system. The fall in yields for the US treasury notes and treasury bonds is the result of this movement.
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Bank of Baroda in a report, published recently, said the Indian rupee is expected to gain against the US dollar in the next fortnight with a range of Rs 81.5/$-82.5/$.
In April, the Indian rupee gained 0.4 per cent building on a gain of 0.6 per cent it made in March 2023. While oil prices increased, a weaker dollar, foreign portfolio investment (FPI) inflows, and improvement in external outlook supported the Indian rupee to gain, Bank of Baroda said.
In April, the dollar index fell by 0.9 per cent on the expectation that the US Federal Reserve is nearing an end to its rate hike cycle gaining momentum, the bank report.
Bank of Baroda said that the European Central Bank (ECB) and the Bank of England are expected to continue with their rate hike cycle owing to the stickiness in inflation.
