Rupee falls to hit 80 mark briefly, may depreciate further on strong US dollar, pessimistic market sentiments

The Indian rupee is likely to depreciate further on Friday amid strong dollar and pessimistic global market sentiments. Additionally, consistent FII outflows and concerns on looming recession may hurt the local unit.

Rupee falls to hit 80 mark briefly, may depreciate further on strong US dollar, pessimistic market sentiments
US$INR (July) is expected to trade in a range of 79.60-80.20

The Indian rupee is likely to depreciate further on Friday amid strong dollar and pessimistic global market sentiments. Additionally, consistent FII outflows and concerns on looming recession may hurt the local unit. “Further, investors are expected to remain vigilant ahead of crucial economic data from the US and statements from Fed officials. US$INR (July) is expected to trade in a range of 79.60-80.20,” said ICICIDirect. In the previous session, rupee briefly touched Rs 80 mark intraday on the offshore non-deliverable forward (NDF) market. The domestic currency settled at a new record low of 79.90, down 18 paise from the previous close of 79.81. The fall was recorded due to a firm dollar in overseas markets and capital outflows.

Sugandha Sachdeva, Vice President – Commodity and Currency Research, Religare Broking Ltd

“The Indian rupee has rolled down to another record low as the unabated red-hot inflation data in the US has raised the case for a full percentage point rate hike at the Fed’s meeting later this month, given the Fed chair’s stance that inflation must be brought down as quickly as possible. US annual consumer prices jumped by a scorching 9.1% in June, the highest in four decades, topping expectations of an 8.8% rise. The aggressive policy course by the US Fed to curb rising price pressures is exacerbating fears of a weakening growth outlook and leading to risk aversion in the markets. Besides, we have seen a relentless rise in the dollar index, while the euro has been hit hard as it tumbled below parity against the dollar for the first time in almost 20 years”

“Europe is grappling with an energy supply crunch owing to sanctions on Russia that make it more susceptible to recession risks. This has led to a big moment depicting strength in the greenback as markets are expecting the US Fed to raise rates way more swiftly than its peers. Going forward, it remains to be seen whether the single currency can hold around the psychological parity level and regain some lost ground. All eyes would now be on the ECB meeting lined up next week and that will provide further cues about the rupee-dollar exchange rate. Considering the macroeconomic backdrop, the Indian rupee has its eyes set on the 81 to the dollar mark in the near term.”

Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities

“USDINR closed at 79.87 on spot, up 24 paise. Intra day high was 79.91. However, post closing, spot reference in the offshore has bumped above 80.00. Post US CPI, odds of a 100 bps rate hike from has increased significantly. Fed is not just hiking, they are increasing the pace of hikes in every meeting. At the same time, US yield curve has become inverted. An inverted yield curve hints at dramatic growth slowdown and even recession. This cocktail of aggressive Fed and growth slowdown is what can hurt flows towards Emerging markets, like India, and cause USDINR to rise further. We need to keep an eye on the Chinese currency and the Euro. If they fall further, it can drive USDINR towards 80.50 even. Bias remains upward. Range can be between 79.60 and 80.40 on spot.”

Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services

“Rupee fell for the fourth successive session and fell to fresh all-time lows as the dollar rose sharply against its major crosses after inflation in the US. The greenback rose after data showed U.S. inflation, already at four-decade highs, accelerated even further. Later in the day, odds of a 100 basis points move fell, however, after a couple Fed members supported another 75-basis-point interest rate increase at the central bank’s policy meeting later this month, but would lean toward a larger hike if new data shows demand is not slowing fast enough to reduce inflation.”

“Euro hit a 20-year lows after a party in Italian Prime Minister Mario Draghi’s coalition government failed to support a parliamentary confidence vote including measures to offset the cost of living crisis. Today, focus will be on the retail sales and industrial production number from the US. Better-than-expected economic data could extend gains for the dollar. We expect the USDINR(Spot) to trade with a positive bias and quote in the range of 79.40 and 80.20.”

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