Rupee likely to slip on strong dollar, elevated crude oil prices; USDINR pair to trade in this range

The rupee is expected to depreciate today due to stronger dollar. Further, rising crude oil may continue to put pressure on the Rupee for the day.

inr vs usd
USDINR(Spot) pair to trade with a positive bias and quote in the range of 74.80 and 75.50inr vs

The Indian rupee on Thursday fell for the third consecutive session to end 30 paise lower against the US dollar, tracking the strength of the American currency after a hawkish US Fed policy stance.The domestic currency is turning increasingly volatile after the Federal Reserve on Wednesday pointed to an imminent increase in rates for cooling prices. At the interbank foreign exchange market, the rupee opened at 75.18 against the greenback and witnessed an intra-day high of 75.07, a low of 75.31 before finally settling at 75.08, down by 30 paise over its previous close. Rupee is expected to depreciate further on strong dollar, elevated crude oil prices, political crisis in Ukraine and hawkish US Fed.

Rupee to depreciate on strong dollar: ICICI Direct

“The US dollar surged 1.31% on Thursday on the back of improved GDP data from US. Further, hawkish statements from US Fed supported dollar. US GDP expanded at a 6.9% annualised rate in CYQ4, the best performance since 1984. However, the decline in US 10 year treasury yields capped further upside in the dollar Rupee future maturing on February 25 depreciated by 0.45% amid firm dollar, elevated crude oil prices and sell off in the domestic markets. The rupee is expected to depreciate today due to stronger dollar. Further, rising crude oil may continue to put pressure on the Rupee for the day. Meanwhile, investors will keep an eye on series of macroeconomic data from US. US$INR (February) is expected to rise towards 75.60.”

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

“Rupee fell sharply after the Federal Reserve in its policy statement hinted towards a more hawkish stance thereby extending gains for the dollar against its major crosses. The Fed signaled it is likely to raise U.S. interest rates in March and reaffirmed plans to end its bond purchases that month before launching a significant reduction in its asset holdings. Yields on longer-dated Treasury securities, sensitive to the Fed’s balance sheet policy, rose as Powell signaled that a decision would be made soon on when to start shrinking the central bank’s more than $8 trillion portfolio of U.S. government bonds and mortgage-backed securities.”

“Dollar extended gains in yesterday’s session also after data released from the US came in better-than-estimates. Advance GDP increased at 6.9% annualized rate in the fourth quarter followed a 2.3% growth pace in the third quarter. Growth last quarter was also lifted by a jump in consumer spending in October before retreating considerably as Omicron raged. Today, focus will be on the core PCE index number and that could trigger volatility for the dollar in the latter half of the session. We expect the USDINR(Spot) pair to trade with a positive bias and quote in the range of 74.80 and 75.50.”

USDINR can slip into a range: Kotak Securities

“USDINR is a mean-reverting currency pair. One way to express that mathematically is to take a deviation from the mean. In this case, we have taken the 6-month moving average and 12-month moving average as the two means. Over the past 4 years, USDINR has formed a bottom in between these two averages as RBI has followed an interventionist policy. Macro-stability and few episodes of sustained global risk-off have not allowed USDINR to veer away from its averages for long. The last two episodes of major spikes were during the trade war and COVID.”

“Since COVID, USDINR has topped out in the 3%-4% range. Currently, that number is near 76.50 levels. However, with the Union Budget on Feb 1st, USDINR can slip into a range as traders assess the policy changes on tax laws and FEMA to allow foreign investor participation in the GOIsecs and in the LIC. Attractive real yields on Rupee are preventing a panic amongst the carry traders, which creates sharp upward trends. Trend remains upward with 74.70 as the important bullish pivot on the spot and 75.35 and 75.85 as near-term resistances on spot.”

Kshitij Purohit, Lead Commodity & Currency at CapitalVia Global Research

“The rupee is becoming more volatile after the Federal Reserve indicated on Wednesday that rates will be raised soon to help temper prices, sparking a 28 basis-point jump in a key index of investor worry just hours after the latest US policy stance was announced. The rupee fell 0.40% against the dollar on Thursday, closing at 75.07. It fell to 75.31 per dollar during the day’s trade, but later recovered some of its losses after some significant corporations were seen selling dollars. The dollar has surged against all emerging market currencies, including the rupee, as the US Federal Reserve has hinted that it will raise interest rates for the first time in March. The price of crude oil is rising globally as a result of the political crisis in Ukraine. The rupee is also being weighed down by this, with local exchange rate volatility increasing.”

“In the last week, global crude oil prices have risen about 5% to nearly $91 per barrel. India is one of the world’s largest crude importers, importing more than three-quarters of its needs from other countries. On Friday, the dollar was on track for its best week in seven months after breaking through key levels against the euro as investors priced in a year of rapid interest rate hikes in the United States. After leaving the door open on Wednesday to raise rates quicker than in recent cycles, Federal Reserve chair Jerome Powell unleashed bets on five or more rises this year. The USDINR pair ended the day’s trading session at 75.07. Immediate resistance is estimated to be around 75.50, which corresponds to the psychological level. On the other hand, immediate support will be found at 74.34, which also happens to be the supertrend level.”

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