Rupee likely to remain volatile on month-end rebalancing; USDINR expected to trade in this range | The Financial Express

Rupee likely to remain volatile on month-end rebalancing; USDINR expected to trade in this range

Attention will turn to a long slate of economic data next week, including the Fed’s favoured inflation metric and nonfarm payrolls along with the PMI numbers from most of the countries.

Rupee likely to remain volatile on month-end rebalancing; USDINR expected to trade in this range
India's foreign exchange reserves rose for a second week to $547.25 billion in the week through November.

By Dilip Parmar

The Indian rupee ended the week on a flat note on the back of weaker regional currencies. Among the Asian currencies, the Chinese Yuan depreciated around a percentage point amid surging COVID cases which forced the authority to continue with lockdowns. The marketmen worried about global growth and supply worries could further push the global economy into lower growth for next year as well. However, the less hawkish comment and Fed meeting minutes dragged the dollar index lower and risk assets higher in the week gone.

Last week, spot USDINR consolidated in the narrow range of 81.90 to 81.50 before settling at 81.69 with no change. The weekend remained lacklustre and of thin volume for global forex markets on the back of the holiday in Japan and the US. Among the Asian currencies, the rupee remained the median performer even after weaker crude oil prices, higher domestic equities, foreign fund inflows and central bank dollar buying.

Indian rupee is expected to trade on the volatile side as month-end rebalancing and the data bucket remains full of events. Technically, spot USDINR is having strong resistance at 82.10 while on the downside at 81.30 and 80.50 becomes a major support area. The near-term bias remains bearish as long as the pair trades below 82.10. India’s foreign exchange reserves rose for a second week to $547.25 billion in the week through November. 18 and for the first time after May when reserves were up for two consecutive weeks. The central bank dollar buying, revaluation of dollar assets and gold pushed the forex kitty higher in the said period.

Attention will turn to a long slate of economic data next week, including the Fed’s favoured inflation metric and nonfarm payrolls along with the PMI numbers from most of the countries. Prints that suggest price pressures are continuing to ease and the labour market is weakening will boost bets on a smaller rate hike by the central bank next month.

Any data which shows job degrowth will be good for risk assets and negative for the haven dollar as it prevents Fed from being too hawkish, the converse will also be true. The next Fed meeting is on 14th December and the 50-bps hike is the most probable scenario. As per the CME futures, 75% of bets are on the 50-bps hike, a bad job report will stretch this number towards 90%.

(Dilip Parmar is a research analyst at HDFC Securities. The views expressed are author’s own)

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First published on: 29-11-2022 at 12:05 IST