Rupee appreciated towards 82.05 levels last week on the back of weak dollar and pull back in domestic markets. Further, currency firmed on anticipation that the US Federal Reserve was near the end of its rate hiking cycle. USDINR pair after making a high of 82.70 levels retraced back to 82.40 levels.
In this month major central bank across the globe raised their policy rates. US Federal Reserve raised its interest rate by smaller magnitude for 2nd consecutive meeting ending the era of higher pace of rate hikes and also signaled an end to its rate hike campaign sooner. Additionally, Mr Powell’s statements and change in forward guidance language indicates that there could be less need for the Fed to hike rates. Furthermore, Fed Chair Powell said policymakers had considered skipping rate hikes after banking stress intensified. Moreover, US Treasury Secretary Janet Yellen said she has not considered or discussed anything having to do with blanket insurance or guarantees of deposits.
Bank of England also followed the footsteps of the Fed and raised its benchmark rate by 25bps. In the previous meeting BOE indicated a pause in rate hike but an unexpected surge in inflation persuaded policymakers to go for one more rate hike. Policymakers said the UK’s banking system remains resilient and warned they may need to raise the key rate again We expect Dollar index to face hurdle near 104 levels and correct further till 101.0 levels on anticipation that the Fed will have to take a back seat soon and put a pause on tightening plans as the Fed restrictive policy is hitting financial sector.
We expect Indian Rupee to appreciate amid retreat in dollar as US Federal Reserve signaled pause on its monetary tightening drive. USIDNR has so far been able to protect itself beyond 83.00 level and largely remained below these levels from the past couple of months. We expect USDINR pair to continue its appreciation towards 81.80 levels this week. USDINR may face an immediate hurdle near 82.70 levels. A break below 81.80 levels may push the pair further downside till 81.65/81.45 levels.
Investors will remain cautious ahead of major economic data from the US and Europe to get fresh direction cues. US core PCE price index is likely to show that inflation remained sticky even the CPI data from Europe is projected to show that price pressure remained elevated.
For Monday Rupee future maturing on March 28th may appreciate further till 82.10 levels as long as it sustains below 82.35 levels amid soft dollar.
(By ICICI Securities