Rupee likely to appreciate on retreat in dollar, declining crude prices; USDINR pair to trade in this range

The Indian rupee is likely to appreciate on Tuesday amid declining crude oil prices, retreat in US dollar and FII selling slowdown. However, gains may be capped by risk aversion in global markets ahead of the US Fed meeting later this week.

Rupee likely to appreciate on retreat in dollar, declining crude prices; USDINR pair to trade in this range
USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 80.80 in next couple of sessions

The Indian rupee is likely to appreciate on Tuesday amid declining crude oil prices, retreat in US dollar and FII selling slowdown. However, gains may be capped by risk aversion in global markets ahead of the US Fed meeting later this week. USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 80.80 in next couple of sessions, according to analysts. In the previous session, rupee inched higher against US dollar tracking a modest rise in its Asian peers as the Reserve Bank of India has vowed to do what it takes to defend the rupee from “jerky movements.” The gains in the domestic currency were limited by losses in domestic stock markets ahead of the Federal Reserve meeting this week and on global economic activity risks. The local unit gained 16 paise to close provisionally at 79.74 against the greenback.

Dilip Parmar, Research Analyst, HDFC Securities

“The Indian rupee is expected to open slightly higher but could come under pressure with a rebound in crude oil prices and risk-averse moods. After the previous week’s buying by foreign institutions, they again turned sellers on Monday as per the provisional figures. The forward markets indicate USDINR could open slightly lower around 79.70. Looking at the overall chart set-up and fundamentals USDINR might remain in the range of 79.70 to 80.10. Rupee started the week on the front foot by strengthening to its highest level in more than a week tracking broad losses in the dollar, but weaker local shares and losses in other Asian peers ahead of the U.S. Federal Reserve meeting’s outcome later this week limited gains.”

Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas

“Indian rupee gained against the US Dollar on soft greenback and weak crude oil prices. However, weak domestic equities and FII outflows capped sharp gains. FII outflows rose to Rs.675 crores on Friday. Dollar declined on disappointing economic data from US. US flash manufacturing PMI declined to 52.3 in July from 52.7 in June. US flash services PMI declined to 47 in July as against 52.7 in June.”

“We expect Rupee to trade on a mixed to negative note on risk aversion in global markets amid concerns over global economic recovery, inflation and recession. Expectations that Dollar may bounce back on expectations of a hawkish Fed and an aggressive rate hike in the FOMC meeting later this week. Decline in India’s forex reserves may also weigh on Rupee. India’s forex reserves declined to $572.71 billion as on July 15, 2022 from $580.25 billion in the prior week. Markets may also take cues from foreign fund flows and decline in global crude oil prices. USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 80.80 in next couple of sessions.”

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

“Rupee consolidated in a narrow range and rose marginally ahead of the important Fed policy meeting that is scheduled later this week. Dollar was lower against a basket of major currencies as investors weighed the implications of a rate hike by the U.S. Federal Reserve in an economy that may be on the verge of a recession. Recent data has shown signs of an economic slowdown while inflation remains stubbornly high, with claims for jobless benefits rising to its highest in eight months last week and regional manufacturing gauges slumping.”

“Inflation has actually accelerated since the Fed began raising rates in March, prompting officials to shift from the quarter-percentage-point increase that month to a half-percentage-point hike in May and to a 75-basis-point increase in June. Pound rose against the US dollar despite weak economic data releases from the UK. Today, focus will be on the consumer confidence number that will be released 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 79.70 and 80.40.”

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