Rupee likely to remain flat ahead of US Fed meeting; USDINR pair to trade in this range

USDINR spot closed 5 paise higher at 79.78. Traders remain on sidelines ahead of the US FOMC. Volatility expected to increase post the US Fed and USDINR may trade with an upward bias.

Rupee likely to remain flat ahead of US Fed meeting; USDINR pair to trade in this range
USDINR(Spot) to trade with a positive bias and quote in the range of 79.70 and 80.40.

The Indian Rupee is likely to remain steady ahead of the US Federal Reserve meeting later tonight. A hawkish meet will lead to a sharp jump in the Dollar Index, whereas a dovish and data dependant kind of a signal will lead to a fall. If they remain in line with what the market is discounting currently, then index will remain in a range of 106 to 107 zone. The judgment will surely impact EM currencies and so Indian Rupee, according to the analysts. In the previous session, rupee pared its initial gains to settle flat against the US dollar amid muted domestic equities, firming crude oil prices and concerns over the hawkish US Fed. The local unit opened at 79.73 at the interbank forex market and finally settled at 79.78 per dollar, unchanged from its previous close.

Dilip Parmar, Research Analyst, HDFC Securities

“Rupee could start the day on muted note ahead of July’s monthly expiry. The expiry could be lacklustre as the position remains light ahead of the FOMC policy decision later tonight. Asia currencies are mixed against the dollar and may weaken ahead of the FOMC interest-rate decision this week. The Fed is widely expected to raise the fed funds rate by 75bps and any upward surprise will bid well for the dollar.”

“Open interest for USDINR contracts maturing today stood at $5.5b in July across NSE and BSE, while the August maturity contract has seen rising open interest at $2.56b. This number is substantially below June’s $8b indicating mute expiry with low volatility. Spot USDINR is expected to trade in the narrow range of 79.60 to 79.90 in today’s session. On Tuesday, Spot USDINR erased intraday losses and closed with gains of 5 paise to 79.78. Weakness in domestic equities, higher crude oil prices and a stronger dollar index weighed on the rupee during the day.”

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

“USDINR spot closed 5 paise higher at 79.78. Traders remain on sidelines ahead of the US FOMC. We expect volatility to increase post the US Fed. We could see USDINR trade with an upward bias, within a range of 79.60 and 80.00 levels on spot.”

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

“Rupee consolidated in a narrow range and rose marginally ahead of the important Fed policy meeting that is scheduled today evening. Dollar rose against a basket of major currencies as recession fears grew while energy supply concerns weighed on the euro. The Fed is widely expected to raise interest rates by 75 bps, with investors keeping a close eye on the central bank’s forward guidance as it grapples with high inflation and the potential for a recession. Fear of slowdown rose after data showed U.S. consumer confidence fell for a third straight month in July, while new home sales dropped to their lowest level in more than two years.”

“On the other hand, Euro fell after European Union countries approved a weakened emergency plan to lessen gas demand, after striking compromise deals to limit the cuts for some countries, as they gird for further Russian reductions in supply. Today, apart from Fed policy statement, market participants will be keeping an eye on the durable goods number that will be released from the US. Better-than-expected economic data could extend gains for the dollar. We expect the USDINR(Spot) to trade with a positive bias and quote in the range of 79.70 and 80.40.”

Amit Pabari, MD, CR Forex Advisors

“Last time on June’s future expiry day, we had seen a jump of almost 35 paise in USDINR pair. So, sharp moves could be expected this time as well and thus one should remain cautious. A hawkish meet will lead to a sharp jump in US DXY towards 108-108.50 levels, whereas a dovish and data dependant kind of a signal will lead to a fall in US DXY towards 106-105.50 levels. If they remain in line with what the market is discounting currently, then US DXY will remain in a range of 106 to 107 zone.”

“The judgment will surely impact EM currencies and so Indian Rupee. Broadly, lull period before the storm is over. RBI must have geared up to act upon the same but still, one should also tighten their seat belt and remain fairly covered as per the defined Risk Management Policy. For USDINR pair, a convincing break below 79.70 could lead to a correction towards 79.40 to 79.20 levels. Whereas, a break above 80.05/10 will lead to a sharp jump towards 80.40-50 levels.

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