Mumbai: Pent up demand for US dollars by the jewellery sector, coupled with a weak Chinese yuan are expected to exert pressure on the Indian rupee during the upcoming week, experts said on Saturday.

“Keep an eye out for the bullion users, as once they get back to work, we can see a lot of pent up demand from these guys to emerge. This demand, along with demand from central bank can exert an upward pressure on dollar/rupee (pair),” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

A sizeable section of jewellery industry players have been on strike against a proposed one percent hike in excise duty on non-silver jewellery in the union budget for 2016-17.

(Also Read: Delhi CM Arvind Kejriwal asks CMs to oppose excise duty on jewellery)

They have been on strike since March 2. The central government has constituted a panel to look into their demands.

“Chinese yuan has begun weakening which should be an added negative for rupee as well. We see USD/INR trade between 66.30-50 and 67.00/67-20 levels for the next week,” Banerjee cited.

According to Banerjee, despite a mid-week sell-off towards 66.93, rupee managed to close nearly flat, due to relentless selling of US dollars from fronts like IT (information technology) companies.

“Demand for US dollars from RBI (Reserve Bank of India) has managed to build a floor under the US dollar for the moment, around 66.40-50 levels on spot,” Banerjee elaborated.

“However going into the final quarter of the year, we can see more selling from large exporters.”

During the truncated week ended March 23, the rupee weakened by 12 paise. The domestic currency markets were closed on Thursday-Friday, on account of Holi and Good Friday.

On a weekly basis, the rupee weakened by 12 paise to 66.62-63 (March 23) against a US dollar from its previous close of 66.50-51 (March 18) to a greenback.

Other analysts, attributed the rupee weakness on a strong US dollar. The US dollar has strengthened on the back of increased chances of a hike in US interest rates in April.

Even the Brussels attacks led investors to park their funds in safe assets like the US dollar.

Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS: “The US dollar rose due to its appeal as a safe haven asset, pushing rupee towards the 67 mark.”

However, there was an increased inflows by the foreign investors in the country’s equity and bond markets.

The National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) bought Rs.6,340.82 crore or $952.79 million in the equity and debt markets from March 21-23.

Data with stock exchanges disclosed that the FPIs invested in stocks worth Rs.3,468.68 crore during the week under review.

According to Hiren Sharma, senior vice president, currency advisory at Anand Rathi Financial Services, US Federal Reserve’s slow rate vision and expansion of ECB’s (European Central Bank) bond purchase program has motivated global equity investors.

“A revival in crude oil price has instigated a risk on mood presently. Since March 1st, a net of $1.6 billion inflow (mostly in equity) has come into India,” Sharma told IANS.

“Rupee has a very strong support at 66.50-40 and resistance around 66.80-67.10. It is expected to remain in this range for penultimate week of FY15-16.”

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