scorecardresearch

Rupee may depreciate next week on strong dollar, pessimistic market sentiments; USDINR to trade in this range

Rupee may depreciate amid strong dollar and pessimistic global market sentiments. Further, a surge in crude oil prices and persistent FII outflows will hurt rupee.

Rupee may depreciate next week on strong dollar, pessimistic market sentiments; USDINR to trade in this range
USDINR (Oct) is likely to trade towards the level of 83.00

By Raj Deepak Singh

Rupee depreciated this week to a new all-time low and touched 83.32 level in the futures market amid a strong dollar and continued FII’s outflow from domestic markets. FII have turned net sellers. In October till date, there has been an outflow of Rs 8448 crores into Indian markets (Source: NSDL). Further, rupee weakened on re-bounce in crude oil prices and pessimistic global market sentiments. Investors weighed the most important question of how aggressively major central banks across globe will raise interest rates to combat elevated inflation 

Also Read: Muhurat trading: Nifty likely to deliver 12-15% returns in Samvat 2079; SBI, ITC, M&M among top stock picks

Indian Rupee is likely to continue with its depreciation mode in the coming week amid strong dollar and risk aversion in the global markets. Dollar is gaining strength on hawkish statements from Fed officials and as US treasury yields marched higher. Some of the Fed officials are of the view that job market demand remained strong and inflation pressures probably had not peaked yet. Even the Fed’s commitment to combat soaring inflation will be supportive for dollar. Market participants anticipate Fed to raise interest rates by 75bps in the upcoming meeting for 4th consecutive time. CME fed tool watch indicates 96.5% probability of 75bps rate hike in November meeting. 

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. Moreover, in the coming week manufacturing and services PMI data across the major countries are likely to show contraction in the activity. Meanwhile, US Core PCE Price Index is forecasted to show that inflation remained sticky supporting Fed aggressive monetary tightening move. 

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 constructive signals from china and on the prospect of tightening supply in the coming months. Rising oil prices will exacerbate global inflation and slow down economic growth. 

Also Read: Samvat 2079: Nifty may scale 21000; buy ITC, Kotak Bank, among other stocks this Diwali to pocket gains

As long as USDINR spot sustains above 82.00 it may rally till 83.50. USDINR pair is making higher high and higher low pattern with an increase in open interest. INR is trading in an upward trend and has more room on the upside. It is also well placed above the 20 SMA with an increase in volumes, suggesting an upward move. For Monday, Rupee may depreciate amid strong dollar and pessimistic global market sentiments. Further, a surge in crude oil prices and persistent FII outflows will hurt rupee. USDINR (Oct) is likely to trade towards the level of 83.00.

(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)

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

First published on: 22-10-2022 at 10:35 IST