Mumbai, May 7

A weak US dollar, coupled with foreign capital inflows and passage of key economic legislation, are expected to guide the Indian rupee's movement during the upcoming week.

"The persistent weakness in dollar is expected to support the rupee's trajectory, going forward," Bansi Madhavani, analyst, India Ratings and Research, told IANS.

"Critical data to watch this week would be the domestic CPI (consumer price index) inflation and IIP (index of industrial production) numbers along with global data points like China's inflation for April."

According to Madhavani, the Indian rupee is likely to stay on a consolidation mode over the coming week. 

"Investors will remain sensitive to shifts in global risk preferences, keeping the flows to Indian markets defensive," Madhavani informed.

"The rupee, consequently, may extend its consolidation over the coming week."

Besides, the global macro-economic data on the US retail sales and consumer sentiment, along with inflation figure from China and Eurozone GDP (gross domestic product) numbers will influence the currency markets. 

"Next, the rupee could react to a whole host of economic data to be released from India and abroad. From India, the CPI and industrial production data will be keenly watched," said Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities said.

"From US, they will keep a close eye on the retail sales, JOLTS jobs data and consumer sentiment. Along with that market will also pay attention to the Chinese inflation and European GDP data." 

On a weekly basis, the Indian rupee weakened by 21 paise to 66.54-55 (May 6) against a US dollar from its previous close of 66.33 (April 29).

Market observers attributed the Indian rupee's fall on the increased outflows of foreign funds from the equity markets.

For the week under review, data with the stock exchanges revealed that FPIs (Foreign Portfolio Investors) sold stocks worth Rs.747.60 crore.

Figures from the National Securities Depository Limited (NSDL) showed that the FPIs divested Rs.773.62 crore or $116.58 million in the equity markets from May 2-6.

According to an independent analyst from New Delhi, the Indian rupee is expected to oscillate in the immediate range of 66-67.50 in the coming week.

(Rohit Vaid can be contacted at [email protected])