Rupee Appreciates 4% Against Dollar in FY21

The rupee is expected to average around 73.50-74 in FY22, as, despite a vaccine, the COVID-19 frenzy still persists and is likely to continue to grapple the foreign exchange market.

The Indian rupee has registered more than 4% gain so far this fiscal year in the backdrop of sustained foreign fund inflows and the Reserve Bank of India's (RBI) dexterous policy manoeuvring, which ensured a solid year for the Indian currency, despite headwinds on the economic front, according to experts.

The pandemic-induced massive sell-off in the stock market led the rupee to breach a record low of 76.90.

However, the optimism over vaccines, easing of lockdown restrictions, infusion of stimulus by governments and central banks all over the world enthused investors with a general sense of optimism, and the rupee vaulted back to the 72 zone.

“Despite headwinds on the economic front and larger-than-anticipated fiscal deficit, the RBI's deft manoeuvring ensured lower yields for the G-secs and substantial accretion to forex (foreign exchange) reserves this year,” HDFC Securities Deputy Head (Retail Research) Devarsh Vakil told.

He added that the rupee is up by 4% against the US dollar for FY21 despite having much higher interest rates and inflation than the US.

Experts said sustained foreign fund inflows into India's listed stocks ensured a strong year for the Indian currency.

For the current financial year, foreign investors have poured in $35.22 billion, the biggest inflow since 2014-15. India has attracted the highest-ever foreign direct investment (FDI) inflows at $67.54 billion during the first nine months of the financial year 2020-21.

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