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Rupee may depreciate on strong dollar, risk aversion in markets, FII outflows; USDINR to trade in this range

Rupee is likely to depreciate further on Tuesday on strong dollar, risk aversion in global markets and persistent FII outflows. In the previous session, rupee plunged to close at an all-time low against the US dollar.

Rupee vs dollar, dollar to rupee, usdinr
The rupee is in for another torrid session with growing calls for the Fed to hike by 75bps Wednesday which supported a stronger dollar and weaker risk assets

The Indian Rupee is likely to depreciate further on Tuesday on strong dollar, risk aversion in global markets and persistent FII outflows. In the previous session, rupee plunged to close at an all-time low against the US dollar, as a lacklustre trend in domestic equities, stronger greenback overseas weighed on investor sentiments. At the interbank foreign exchange market, the local currency opened at 78.20 and settled at 78.13, down 20 paise over its previous close. The US dollar stood by a fresh 20-year peak as investors braced for aggressive rate hikes and a possible recession. The Fed will deliver its largest rate hike in 28 years to tackle inflation, a move that should push dollar to a fresh high against its major currency rivals, Jefferies said on Monday.

Dilip Parmar, Research Analyst, HDFC Securities

“The rupee is in for another torrid session with growing calls for the Fed to hike by 75bps Wednesday which supported a stronger dollar and weaker risk assets. The Fed meeting is likely to be historic because Powell & Co. may finally show their commitment to getting ahead of inflation by raising unemployment and could signal the economy into a recession. Back home, the rupee is expected to open 5 to 7 paise lower taking cues from overnight strength in the dollar index and forward markets. There are multiple factors like capital outflows, higher crude oil prices, and strong dollar demand which could add pressure on the rupee against the American dollar. Spot USDINR is having resistance at 78.30 and crossing of the same will lead to an upside towards 78.70 and 79 while downside support remains at 77.50.”

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

“USDINR touched a fresh all time high at 78.27 but closed off its highs at 78.03 on spot, up 20 paise. Heavy RBI intervention is suspected, both in spot as well as forwards. Thanks to that alleged intervention, today Rupee is one of the strongest currency in the world. Going forward, till US Fed meeting on Wednesday, there can be significant upward pressure on USDINR. Odds for a 75 bps hike is rising and that is positive for USD. However, we expect RBI to cap the upside. We are looking at a range of 77.90 to 78.40 on spot over the near term.”

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

“Rupee fell to fresh all-time lows following weakness in domestic and global equities and also as the dollar rose sharply against its major crosses. On the domestic front, inflation eased marginally in May, after touching an eight-year high of 7.79% in April, but remained above the central bank’s tolerance band for a fifth month in a row. Inflation number released from the US led to broad strength in the dollar. Safe haven buying was seen in the dollar supported by fears of a global economic slowdown and bets on steep interest rate hikes by the U.S. Federal Reserve. Today, focus will be on the PPI number that will be released from the US and a higher number could extend gains for the  dollar. We expect the USDINR(Spot) to trade with a positive bias and quote in the range of 77.70 and 78.40.”

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