Rupee's performance will largely depend on global risk sentiments and the domestic reform push, said Abhishek Goenka, CEO of IFA Global, which deals in forex and risk management
Rupee's performance will largely depend on global risk sentiments and the domestic reform push, said Abhishek Goenka, CEO of IFA Global, which deals in forex and risk management.
The global risk sentiment would continue to be shaped by the Fed Policy, recovery in Chinese and Eurozone economy, he added.
The forex markets were largely dominated by the actions of central banks, including the US Federal Reserve, this year.
While Fed has finally decided to end its protracted period of near zero interest rate policy, the rate hike of 25 basis points came at the fag end of the year and speculation is already abound about its next move.
Also read: Rupee to end 5% down from 2014-level, still be best-performing currency
Another major factor dominating the global markets during the year was the collapse of Chinese equity markets and slowdown in its economy. The Shanghai composite fell nearly 40% within a span of few weeks trapping many retail investor and corporate profits began to shrink owing to poor global and domestic demand and oversupply.
The Indian rupee, which was being seen as stabilising in the range of 63-65 in the early part of the year, soon hit on a downward path after a devaluation of the Chinese Yuan by around 4% sent the Asian currencies into a tailspin.
On the domestic front, the Reserve Bank initiated several steps to support the Indian currency. The RBI increased Foreign Portfolio Investor (FPI) investment limit in fixed income markets, allowed importers to raise trade credit in Indian rupee from overseas, allowed companies to raise rupee denominated debt overseas and also showed its intent to intervene in Exchange Traded Currency Derivatives (ETCD) segment.
Also read: Rupee gains 9 paise versus dollar in early trade
The government too played its part by relaxing Foreign Direct Investment (FDI) caps in certain sectors, moved certain sectors to automatic route from approval route, improved indirect tax collections and initiating public sector undertakings (PSUs) stake sale, all of which failed to contain the fall in rupee.
FPI inflows tapered in 2015 as compared to the previous years, which became one of the biggest factors for the rupee depreciation.
Though India's trade deficit shrank as compared to the previous year, exports have contracted for 13 straight months. However, FDI flows have been relatively better.
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