By Raj Deepak Singh
Rupee appreciated back till 82.34 levels last week after making a new all-time low in futures market amid weakness in dollar and rise in risk appetite in the domestic markets. Strength in dollar faded on anticipation that Fed may slow down the pace of rate hikes after November meeting. Some officials signalled their desires to slow down the pace of rate hikes soon. However, sharp gains were prevented on surge in crude oil prices. Indian Rupee is likely to depreciate back till 83.00 levels this week amid re-bounce in dollar and pessimistic global market sentiments. Dollar is gaining strength ahead of US Federal Reserve monetary policy meeting and rise in US treasury yields.
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Market participants anticipate Fed to raise interest rates by 75bps in the upcoming meeting for 4th consecutive time. CME fed tool watch indicates 82.8% probability of 75bps rate hike in November meeting. Furthermore, better-than-expected GDP data from US is supporting dollar to regain back its strength. US GDP rose at 2.6% last quarter after declining in the first half of the year. Meanwhile, investors will remain watchful ahead of RBI additional meeting scheduled on 3rd November. Central bank will submit a report to the government explaining reasons and detail curative actions it will be taking to control prices.
Market sentiments are hurt on fears that spillover from Geopolitical tension, rising energy cost and global monetary tightening to combat high inflation will weigh on economic outlook. In a recent meeting, European Central Bank (ECB) raised its interest rates by 75bps for second time in a row to combat soaring inflation but showed concerns about economic growth. IMF has cut down its growth forecast for Asia amid global monetary tightening to combat soaring inflation and china’s sharp slowdown. The IMF cut Asia’s growth forecast to 4.0% this year and 4.3% next year.
Additionally, this week manufacturing and services PMI data from US is likely to show slowdown in the activity and US Job report is likely to show that less number of jobs were created in economy in October 2022. CPI data from Europe is forecasted to show that inflation remained sticky and Bank of England is anticipated to deliver 75bps increase in interest rates to tame down elevated inflation.
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Additionally, investors are worried that rising crude oil prices will hurt India’s import bill and add fire to soaring inflation. Oil prices are moving north on the prospect of tightening supply in the coming months due to OPEC+ decision to cut supply coupled with sanctions on Russian oil. On a weekly chart, the USDINR pair is trading at 82.47, above the support level of 81.97, which suggests a positive outlook. On the daily chart, it has started making higher lows, which indicates upward trend for the pair. This week, we anticipate USDINR to rise till 83.00 levels.
(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)