Dikhyaa Mohanty 
Due to the new variant of Covid-19 Omicron, there is a serious concern over whether to keep Indian rupee subdued during the upcoming week.
According to the reports, apart from the rising trade deficit along with fears of US tapering measures are likely to hamper any appreciation move. But the downside will be capped by lower oil prices.
Sajal Gupta, Head, Forex and Rates, at Edelweiss Securities stated that rising trade deficit and taper had it’s toll on rupee. Continuos FPI pull out from equities has been countered by IPO inflows so far, and may continue for some more time. The Omicron variant is also a problem less discovered. This would take time to decipher. However, India should benefit from its large vaccinated population.
Last week, the rupee closed at 75.10 to a greenback, weakening significantly. Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities stated that risk sentiment is on the backfoot as worries over Omicron created uncertainty over sustainability in growth. Rupee traders are focusing on movement of dollar index, crude oil, fund inflows and news flow on the new stain of the virus, which will be crucial for directional trade.
As per the Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services- next week, market participants will be keeping an eye on the RBI policy statement and expectation is that the central bank could start the process of normalising policy amid signs of higher inflation by lifting the reverse repo rate from its current record low of 3.35 per cent.
