Rising trade deficit along with chances of a populist budget might dampen rupee's prospects during the coming week.
Nevertheless, persistent interest of FIIs in India's equity market will arrest any sharp depreciation moves.
"The 25-month high trade deficit may put brakes for strong rupee appreciation. Equity markets also looks stretched and a cool-off looks imminent now. Eyes will be on the budget and the ballooning fiscal deficit, which can be a challenge for the local currency," said Sajal Gupta, Head, Forex and Rates, Edelweiss Securities.
On the other hand, new IPOs and hopes of healthy Q3 earning results will retain FIIs' interest in equities.
"We have two IPO subscriptions next week, which can attract FII participation and keep the USDINR spot lower," said Rahul Gupta, Head of Research-Currency at Emkay Global Financial Services.
"However, RBI's intervention will be eyed. In spot 73 is acting as strong support, a break of which will push prices towards 72.70-72.75 and then the 72.50 zone. However, 73.50 will act as immediate resistance," he added.
Till now in January, FIIs have invested around $ 2.3 billion in equities.
Consequently, the rupee continued to appreciate and closed at 73.07 to a greenback.