Mumbai: Rising global crude oil prices along with foreign institutional investors' (FIIs) fund outflow from the equity market will further weaken the Indian rupee during the upcoming week.
Accordingly, the rupee is expected to trade with a weak bias up to 75 to a dollar in the coming week.
Weakness in the rupees value against the dollar will be automatically reflected in its exchange rate with the UAE dirham as the UAE currency is pegged to the dollar. Rupee closed at 20.26 a dirham on Friday.
"Rising crude and trade deficit has been keeping the currency under pressure and even FPI (foreign portfolio investment) outflows have been a constant pressure on the rupee...," said Sajal Gupta, Head, Forex and Rates at Edelweiss Securities.
"It may lose further ground owing to oncoming US Fed meeting and current equity outflows."
Notably, a rate hike by the US Federal Reserve can potentially drive away more FII money from India and other emerging markets.
"Omicron normalisation would also lead to demand revival and thus more imports and more pressure on the rupee... Crude oil prices around $90 to a barrel is a warning bell for commodity price rise in the time to come," Gupta said.
Last week, the rupee closed at 74.41 to a dollar after weakening to 74.75.
"In the coming days, the price action of USDINR will be determined by Crude oil prices, FOMC Meeting outcome, risk sentiments, and dollar inflows," said Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities.
"Spot USDINR is expected to oscillate between 74.10 to 74.8 for the next week."
Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services, said: "This week, market participants will be primarily keeping an eye on the Fed policy meeting as the central bank is likely to provide clarity and details on the end of quantitative easing, possibly in March.
"Apart from the policy statement, preliminary manufacturing and services PMI, advance GDP and core PCE index number to gauge a view for the dollar."