Rupee likely to depreciate on strong dollar, weak market sentiments; USDINR pair to trade in this range

On one hand, a strong US Dollar Index will keep USDINR above 76, but on the other hand, LIC IPO and RBI intervention will keep the upside capped near 76.80 levels on spot.

USDINR, Rupee to dollar, dollar vs rupee
USDINR(Spot) expected to trade with a positive bias and quote in the range of 76.20 and 76.80.

The Indian Rupee may depreciate amid strong dollar and weak global market sentiments. “As long as the USDINR sustains above 76.00 level, it can slip further till 77.00/77.20,” said ICICI Direct. Snapping its two-day losing streak, the rupee rose by 8 paise to close at 76.56 against the US dollar on Tuesday following a rebound in regional currencies and expectations of foreign fund flows as the LIC IPO is likely to hit markets early in May. A fall in crude oil prices also aided gains in the local unit. The Indian currency is expected to do better than Asian and emerging market currencies this month and in May as the expected flow of overseas funds for the LIC initial public offer (IPO) is set to more than offest exits.

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

“USDINR spot closed at 76.57, down 12 paise on the back of rally in markets and news of LIC IPO during first week of May. LIC IPO is expected to attract foreign capital inflows, which will be supportive for the Rupee. Therefore, on one hand, a strong US Dollar Index will keep USDINR above 76 but on the other hand, LIC IPO and RBI intervention will keep the upside capped near 76.80 levels on spot. We expect a broad range of 76 and 76.80 on spot.”

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

“Rupee traded in a narrow range but broadly was under pressure following strength in the dollar against its major crosses. Ahead of the FOMC policy meeting that is scheduled next week, market participants have started discounting a 50bps rate hike announcement at the meeting. Dollar rose to the highest level in two years and hawkish Fed outlook is leading the move in the currency. The greenback extended its gains after data released from the US came in above estimates. New orders for U.S.-made capital goods rebounded more than expected in March, suggesting that business spending on equipment ended the first quarter with strong momentum. Today, focus will be on the trade balance number that will be released from the US but importantly market participants will be cautious ahead of the advance GDP number that will be released tomorrow. We expect the USDINR(Spot) to trade with a positive bias and quote in the range of 76.20 and 76.80.”

Amit Pabari, MD, CR Forex Advisors

“After hitting the first resistance of 76.50 convincingly, now the USDINR pair is eyeing hitting the 76.70 mark. But RBI is still not out in the boxing ring and they could hit back hard. If numbers of weaker fundamentals hard hit the roof, then definitely it will break the 77 mark. Today, the Indian Rupee is expected to start a day around 76.75 and is likely to trade in the range of 76.50 to 76.90 zone. The Indian equities are expected to resume their bearish momentum, following gloomy global cues and uncertainty about domestic growth amid rising inflation. The rising prospects of a faster rate hike and Quantitative Tightening (QT) from the Fed will surely support the ‘Dollar Bull’ and thus Rupee could weaken. On the contrary side, LIC IPO-related flows and RBI could restrict the pair to cross the 77 mark. Till that time the short-term range is confined to 75.70 to 77.00.”

Tapish Pandey, Research Analyst, SMC Global Securities

“The dollar Rupee is likely to trade firm tracking dollar index strong rally above 102 mark supported by the prospect of U.S. rate hikes and on safe-haven flows fanned by slowing growth in China and Europe. On other side, crude oil also extended its gains as geopolitical tensions simmered with Russia warning of gas supply cuts to Poland and Bulgaria while hopes of Chinese economic stimulus buoyed oil demand outlook which will giving to support USDINR rally. On trading setup, USDINR is trading on higher high and higher low cycle indicating that positive momentum is likely to continue in near future. For now, USDINR is likely to trade in range of 76.32 to 77.00 levels with high volatility where any dip towards lower range may be utilized as trading opportunity by keeping stop loss below 76.00 levels.”

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