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Rupee hits fresh record low of 78.29 amid risk aversion in markets, persistent FII selling, inflation concerns

The Indian rupee hit a new record low of 78.29 against the US dollar amid persistent FII outflow. The fall comes amid selling in emerging market equities and currencies ahead of the US Fed Chair Jerome Powell’s testimony to the US Congress later in the day.

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Rupee to remain volatile this week and could test its resistance level of 78.45

The Indian rupee reached a new record low of 78.29 against the US dollar on Wednesday as persistent foreign fund outflow from the financial markets, risk aversion in global equities, elevated crude prices put pressure on the native currency. The fall comes amid selling in emerging market equities and currencies ahead of the US Fed Chair Jerome Powell’s testimony to US Congress later in the day. According to foreign exchange analysts, the local unit has also been hampered by heightened concerns over India’s inflation and current account deficit and elevated crude oil prices. The domestic currency had closed at 78.13 against the greenback in the previous session.

Impact of a weaker Japanese Yen will weigh on rupee

“Indian rupee marked a fresh all-time low as risk assets reversed, foreign fund outflows and weaker Asian currencies, following depreciation in the Japanese Yen. The impact of a weaker Japanese Yen will add pressure on Asian currencies & indirectly put weighed on the rupee too. World over, major central banks are turning hawkish to slow demand and curb inflation which could turn out to be slower growth or even recession in developed nations,” said Dilip Parmar, Research Analyst, HDFC Securities.

“The near-term bias for USDINR remains bullish, tracking cues from other regional currencies and foreign fund outflows. Spot USDINR is having resistance at 78.85 and support will remain at 77.60,” he added.

Rupee to remain volatile this week, could test 78.45 resistance level

Rahul Kalantri, VP Commodities, Mehta Equities, said, “The aggressive interest rate hike plans of the U.S. Federal Reserve and continuous sell-off by the FIIs are exhibiting pressure on the rupee. Widening trade deficits and higher crude oil prices are also restricting gains of the rupee. We expect the rupee to remain volatile this week and could test its resistance level of 78.45.”

“There has been selling pressure across major commodity prices as worries over recession have hit the demand outlook. This could turn into a strong positive point for Rupee if other fundamentals follow the suit. Overall, one can expect the pair to trade in a range of 77.80 to 78.30 levels before giving a breakout on either side,” said Amit Pabari, MD, CR Forex Advisors.

USDINR to trade sideways but with a positive bias

“Rupee fell towards fresh all-time lows especially as the dollar rose against its major crosses. The greenback rose ahead of the Fed Chairman’s testimony. Expectation is that the commentary could be hawkish and that could support the dollar at lower levels.  Pound fell sharply after UK CPI in May came in line with estimates. We expect the USDINR to trade sideways but with a positive bias quote in the range of 77.70 and 78.50,” said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.

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