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Rupee likely to depreciate on strong dollar, risk aversion in markets; USDINR pair to trade in this range

The Indian Rupee is likely to depreciate on Wednesday amid strong dollar and risk aversion in the global markets. Further, persistent FII outflows and rising interest rates across major countries will hurt the domestic currency.

Rupee likely to depreciate on strong dollar, risk aversion in markets; USDINR pair to trade in this range
USDINR(Spot) to trade sideways with a positive bias and quote in the range of 77.20 and 77.80.

The Indian Rupee is likely to depreciate on Wednesday amid strong dollar and risk aversion in the global markets. Further, persistent FII outflows and rising interest rates across major countries will hurt the domestic currency. Snapping its two-day losing streak, the rupee appreciated against the US dollar in previous session, supported by a rebound in regional currencies and fall in crude oil prices. However, weak domestic equities and persistent foreign fund outflows restricted the gains. At the interbank forex market, the local unit opened strong at 77.27 against the greenback and moved in a range of 77.20 to 77.45 in the day trade before finally settling at 77.32, 12 paise higher than its previous close.

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

“Rupee consolidated in a narrow range after falling to fresh all-time lows earlier this week as the broader strength in the dollar continued. Inflation concerns and hawkish comments from the Federal Reserve Chairman is keeping the overall sentiment weighed down. The dollar index rose to 20-year high ahead of a key reading on inflation that could provide clues on the Federal Reserve’s monetary policy path. Market participants will be watching for any signs inflation may be starting to cool, with expectations calling for a 8.1% annual increase compared to the 8.5% rise recorded in March.”

“Inflation and industrial production number on the domestic front will also be keenly watched. Expectation is that inflation could inch over the 7% mark and IIP could witness no major growth and could thereby weigh on the rupee. Yen continues to remain under pressure after one of the BoJ officials said that the Bank of Japan has no plan to allow long-term interest rates to move more widely around its 0% target to stem sharp falls in the yen. For today, we expect USDINR(Spot) to trade sideways with a positive bias and quote in the range of 77.20 and 77.80.”

Rupee likely to depreciate: ICICI Direct

“The US dollar advanced ahead of inflation data that could provide some hint on Fed’s monetary policy path. Further, hawkish statements from multiple Fed officials supported dollar. Fed officials signalled the need for 50 bps hike at the next couple of meetings. Also, demand for dollar increased on worries over slowing global economic growth due to war in Ukraine and resurgence of Covid-19 cases in China. Rupee future maturing on May 27 appreciated by 0.28% amid decline in crude oil prices. However, sharp gains were prevented on strong dollar and pessimistic global markets sentiments.”

“The rupee is expected to depreciate today amid strong dollar and risk aversion in the global markets. Further, persistent FII outflows on worries over slowing global economic growth and rising interest rates across major countries will hurt Rupee. Additionally, markets will remain vigilant ahead of inflation data from US to get clues on how aggressive the Fed will be in tightening policy. US$INR (May) is expected to trade in a range of 77.25-77.75.”

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

“USDINR spot closed 13 paise lower at 77.33, due to weakness in the US Dollar Index and pullback in the US bond yields. We suspect RBI may have intervened to keep Rupee stable. Over the near term USDINR may remain rangebound with an upward bias between 77 and 77.60 on spot.”

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First published on: 11-05-2022 at 08:33:59 am