By Rohit Vaid

Mumbai, Mar 29 (IANS): Weak economic outlook due to domestic resurgence in Covid-19 cases is expected to dampen rupee's prospects during the upcoming week.

Besides, macro economic data points such as a wider fiscal deficit are likely to support the trend.

"Fears of higher Covid-19 cases along with rising inflation will dampen the equity market and rupee during the truncated trade sessions of next week," Sajal Gupta, Head, Forex and Rates at Edelweiss Securities told IANS.

Lately, a new wave of Covid-19 infections has hit several states. This trend comes at a time when India is trying to ramp up the vaccination drive.

Besides, risk of higher inflation as well as slower economic recovery is expected to hamper foreign inflows into the equity segment, thereby, further subduing the rupee.

"It will be a holiday-shortened week as there are only two trading sessions. Volumes will remain light - as many traders will choose to keep their positions light," said Devarsh Vakil- Deputy Head of Retail Research at HDFC Securities.

"Spot USDINR is expected to trade between the range of 72.26 to 72.80 this week."

Currency markets are closed next week on account of Holi on Monday followed by Thursday for annual bank closing and then on 'Good Friday'.

"The worst of the pandemic is behind us, and the risk appetite has taken another significant stride higher but we need more catalyst. Next week is a truncated fx week, and in the interim, market participants will look for signs that Covid-19 cases are making a resurgence globally to simmering US-China tensions," said Rahul Gupta, Head Of Research- Currency, Emkay Global Financial Services

"However, unless any nation stops the vaccine rollout, the rapid vaccination drive by the US will keep the risk appetite higher. While lockdown in Europe and upbeat US data will limit any fall in the USDINR spot. Thus, until the spot is trading below 73 zones, the trend will be bearish, with crucial support being 72.20."

According to Gaurang Somaiya , Forex & Bullion Analyst, Motilal Oswal Financial Services: "Less number of cues on the domestic and global front is likely to keep the volatility low for the currencies. On the domestic front, fiscal deficit number will be released; expectation is that the number could be disappointing and that could keep the rupee weighed down against its major crosses."

"Later in the week, non-farm payrolls number will also be important to watch and better-than-expected economic number could extend gains for the greenback. the week, the USDINR (Spot) to trade with a positive bias and quote in the range of 72.20 and 73.20."