Chennai: The US dollar may not go down much against other currencies in the near future as the potential for further rate hikes are there and flight to safety during uncertainties, Emkay Global Financial Services said in a report.
The Indian rupee may gain some ground due to year end repatriations and once the supply dwindles the currency may become weaker again, it said.
According to the report, the US dollar has conceded some ground to the other major currencies compared to the levels that were prevailing almost a month back.
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, Emkay Global said.
“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,” Emkay Global said.
Adding further the company said, the second and more important factor is — during uncertainties the flight to safety especially to the US Dollar denominated assets is a reality.
Given the fluidity in the developments around the banking system, this preference for high quality instruments or sovereign risk may prevail for a few more months. The fall in yields for the US treasury notes and treasury bonds is the result of this movement.
Recently Bank of Baroda in a report 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 this year, 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, weaker dollar, foreign portfolio investment (FPI) inflows and improvement in external outlook supported Indian rupee to gain, Bank of Baroda said.
According to the bank, 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 report.
The European Central Bank (ECB) and the Bank of England are expected to continue with their rate hike cycle owing to the stickiness in the inflation, Bank of Baroda said.