The rupee, which recorded its biggest single-day gain in three years on Friday, may recoup to 54-54.50 level against the dollar this week on the back of positive outcomes from Euro summit along with improved domestic sentiment, say experts.

On Friday, the rupee logged its second biggest gain in nearly three years rising by 119 paise, or 2.6%, to settle at two-week high of 55.64, against the dollar on clarity on tax-avoidance rules.

However, the Indian currency is still down 4.6% since January and 27.4 per cent since last August when the bad times for the local unit started after the US downgrade by Standard & Poor’s.

“The rupee can recoup to 54-54.50 level in the near term if the positive sentiment continues along with strong action from the Euro area leaders to overcome the crisis,” IDBI Bank Treasury Head N S Venkatesh told PTI here.

European Union leaders on Friday agreed to employ measures aimed at stabilising Spanish and Italian bond markets and establish a Eurozone-wide banking union, prompting a rally in equity markets worldwide.

“If the equity market sees positive capital inflows, then the rupee will definitely appreciate,” Venkatesh added.

He, however, said the government has to take concrete policy actions to address the widening gap between current and fiscal accounts deficits to help the rupee move to sub-54 level.

While current account deficit has overshot the target by a wide margin to 4.2% in FY12 as a whole, and to 4.5% in Q4 of FY12, hitting a two decade low, the fiscal deficit too had risen to 5.76% in the past fiscal against a target of 4.1%.

Source: Business Standard

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