By Raj Deepak Singh
Rupee gained back some of its strength in the previous week and moved back to 81.50 levels as dollar slipped back to 105.60 levels. Dollar lost its strength after the FOMC meeting minutes showed that most of the officials are in view that the central bank should slow the pace of interest rate increases. Additionally, decline in crude oil prices and rise in risk appetite in the global markets supported rupee. Indian Rupee is likely to appreciate back till 81.00 levels this week as dollar is losing its steam. Further, rupee may gain strength on optimistic global market sentiments and softening of crude oil prices. Dollar is moving south as recent economic data from US were weaker than expected.
Disappointing data from the US fueled expectations among investors that the central bank might not have to tighten monetary policy aggressively. Additionally, FOMC meeting minutes showed that most of the officials favoured slowing pace of interest rate hike supporting the idea of less aggressive monetary policy tightening. Policymakers were even worried over the risk of rapid policy tightening on economic growth and financial stability. Meeting minutes also revealed that some of the officials were more anxious about possibility of overdoing the increases. Market sentiments improved as pressure on other major central banks to keep raising interest rates took off after Fed signaled slowdown in pace of rate hike.
However, market participants are worried that widespread lockdown imposed across China to contain COVID-19 outbreak threaten to create uncertainty in global supply chains and hurt global economic growth. Oil prices are declining as fears of supply disruption eased on news that group of seven (G7) nations were considering a high prices cap on Russian oil. Furthermore, US gasoline and distillate inventories rose substantially last week. Additionally, prices may slip further on worries that rising Covid-19 cases in China may lead to wider lockdowns and hamper economic activity. Meanwhile, Russian President Vladimir Putin said Moscow will not supply oil and gas to any countries that join in imposing the price cap.
This week looks eventful. US GDP data is likely to show that economy expanded at slower pace in Q3 CY2022 and Job data is forecasted to show that less number of jobs were added in the economy. Whereas, Core PCE Price index is anticipated to show that inflation remained sticky. Additionally, US Federal Reserve Chairman Powell is due to speak about economy, inflation and labor market at Brooking’s Institution, Washington DC. From India, official national income data for second quarter will be released on 30 November 2022.
USDINR is facing strong resistance near 82.10 level, as long as it sustains below this level it may slip back to 81.00 level in coming trading sessions. For Monday, Rupee may appreciate further amid weak dollar and optimistic global market sentiments. USDINR (Nov) is likely to trade towards the level of 81.40.
(Raj Deepak Singh is an Analyst – F&O, Currency, and Commodities at ICICIdirect. The views expressed are the author’s own. Please consult your financial advisor before investing)