Rupee likely to depreciate amid weak dollar, easing crude prices; USDINR pair to trade sideways in this range

The Indian rupee is expected to appreciate on Friday amid weak dollar and fall in crude oil prices. Further, investors will closely watch ISM manufacturing PMI data, which is expected to drop from 56.1 to 54.9.

Rupee vs dollar, dollar to rupee, usdinr
Rupee spot may depreciate towards 80-81 levels by December 2022, owing to widening of Current Account Deficit and Fiscal Deficit

The Indian rupee is expected to appreciate on Friday amid weak dollar and fall in crude oil prices. Further, investors will closely watch ISM manufacturing PMI data, which is expected to drop from 56.1 to 54.9. “US$INR is expected to trade in the range of 79.20 to 78.90,” said ICICIDirect. Rupee spot may depreciate towards 80-81 levels by December 2022, owing to widening of Current Account Deficit and Fiscal Deficit, according to forex analysts. In the previous session, the rupee rebounded from its all-time low to close 5 paise higher against the US dollar. At the interbank forex market, the local unit opened at 78.92 against the greenback and witnessed an intra-day high of 78.90 and a low of 78.99 before it finally settled at 78.98, a rise of 5 paise over its previous close.

Dilip Parmar, Research Analyst, HDFC Securities

“The Indian rupee is expected to open slightly up following overnight weakness in the dollar index and a plunge in crude and natural gas prices. However, the risk-averse sentiments, India’s ballooning trade gap and capital outflows are raising new risks for the rupee. There is some positive news from the growth front as India’s eight-core infrastructure hit a 13-month high of 18.1% in May. Implied opening from forwards suggests the spot may start trading around 78.95.”

“Spot USDINR on Thursday remained unchanged at 78.97, up ~4.2% this quarter and closed at a life high. The pair has been facing stiff resistance at 79 on expected central bank intervention while on a lower side having support at 78.50 and 78.35. It may trade in the range of 79.10 to 78.70 in the near term with a bullish bias. The combination of falling Treasury yields, lower breakeven and sliding gas prices is starting to worry dollar bulls. Technically, higher lows support the Dollar Spot Index, though upward momentum has slowed ahead of its year-to-date high. The picture starts to turn bearish if it drops beneath a June 16 low of 103.40 and a 20-day simple moving average.”

Jigar Trivedi – Research Analyst- Commodities & Currencies Fundamental, Anand Rathi Shares & Stock Brokers

“Indian Rupee spot is hovering near a record low of 78.98 touched on 29th June, amid broad dollar strength coupled with elevated crude oil prices. Shortage in cash dollars and collapse in 1 year forward premiums have weighed down on Rupee. Going forward, we might see the Rupee spot depreciating towards 80.5/81 levels by the year-end, owing to the widening of twin deficits.”

“Rising crude oil prices might continue to weigh down on the net importer’s trade deficit, after rising to a record high deficit of $24.29 billion in May. Meanwhile, narrowing interest rate differentials amid hawkish central banks across the horizon with Fed ready to hike 75 bps in July might amplify the capital outflows, adding pressure on capital account. Though RBI might intervene in the forex markets to curb the losses, it’s unlikely to draw a line in the sand, as fundamentals remain weak.”

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