Rupee may remain sideways amid strong USD, dismal macroeconomic data; FII inflows; USDINR to trade flat

The Indian Rupee is likely to trade sideways on Thursday amid strong US dollar, dismal macroeconomic data, risk-on sentiments and foreign fund inflows.

Rupee may remain sideways amid strong USD, dismal macroeconomic data; FII inflows; USDINR to trade flat
USDINR pair is likely to consolidate in the range of 79.35 to 79 ahead of the RBI Monetary Policy Committee meeting on Friday.

The Indian Rupee is likely to trade sideways on Thursday amid strong US dollar, dismal macroeconomic data, risk-on sentiments and foreign fund inflows. USDINR pair is likely to consolidate in the range of 79.35 to 79 ahead of the RBI Monetary Policy Committee meeting on Friday, according to forex analysts. In the previous session, rupee slumped 68 paise against the US dollar, as disappointing macroeconomic data weighed on investor sentiment. At the interbank foreign exchange market, the local currency opened lower at 78.70 and fell further to settle at the day’s low of 79.21. Dismal macroeconomic data from India put downside pressure on Rupee.

Dilip Parmar, Research Analyst, HDFC Securities

“Asian currencies are mixed against the US dollar in the morning but could be weighed by concerns of Fed tightening. However, Indian Rupee could open slightly higher following risk-on sentiments and foreign fund inflows. The forward markets indicate spot USDINR could open around 79.10. The pair is likely to consolidate in the range of 79.35 to 79 ahead of the RBI policy decision.”

“On Wednesday, spot USDINR gained 45 paise or 0.57% to 79.16, erasing the previous two days’ losses following bargain buying. Dismal trade deficit and weaker service PMI numbers along with dollar demand from importers pushed the pair upwards, snapping four days of loss. Focus remains on Thursday’s Bank of England decision which could raise rates by 25bps for the sixth straight time. On Friday’s RBI monetary policy decision.”

Sugandha Sachdeva, Vice President – Commodity and Currency Research, Religare Broking

“The Indian rupee has erased all of the gains witnessed in the previous session to drift lower by 0.75% amid concerns about the swelling trade deficit on the domestic front, wherein it has surged to a record high of $31.02 bln in July as compared to $26.18 bln in June. We are yet to see the impact of cooling off commodity prices on our trade data. Besides, the strong advance witnessed in the Dollar Index from the key 105 mark owing to hawkish comments from a trio of Fed officials amid widespread inflationary pressures and rising friction between the US and China have again roiled the sentiments and raised the case for aggressive rate hikes by the US central bank ahead. Strong demand from oil importers and corporates for hedging their overseas loans at attractive levels for the Indian rupee also led to the recent downwards drift witnessed in the domestic currency.”

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

“USDINR closed 45 paise higher at 79.16 on spot. Hawkish comments from Fed members and strength in the US Dollar Index pushed the pair higher. We suspect RBI may have intervened to replenish its reserves. At the same time, much of the long liquidation is behind us and hence market gravitated towards a balanced state. Over the near term, we could see USDINR trade within a broad range of 78.75 and 79.50 on spot, with an upward bias. Key risks are US-China tensions over Taiwan.”

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

“Rupee reversed most of its intraday gains after trade data released on the domestic front showed deficit widened in July. India’s trade deficit widened to an all-time high of $31 billion from $26.2 billion in the previous month, primarily driven by the decline in exports. Exports declined to $35.2 billion in July from $40.1 billion. Market participants remain cautious ahead of the RBI policy statement that is scheduled tomorrow . Expectation is that the central bank could raise rates by 35bps and maintain hawkish stance. Outlook on inflation and growth going forward is likely to provide cues to the currency.”

“Dollar rose in the latter half yesterday after data showed a surprise pickup in the U.S. services industry in July, while hawkish comments from Federal Reserve officials this week also supported the greenback. Earlier this week, the dollar gained after a trio of Fed officials signaled that the central bank remains “completely united” on increasing rates to a level that will put a dent on inflation. Today, focus will be on the Bank of England policy statement; market participants are currently pricing in a greater than 90% chance of an outsized 50 basis point rate hike. We expect the USDINR(Spot) to trade sideways and quote in the range of 78.70 and 79.20.”

Anuj Choudhary – Research Analyst, Sharekhan by BNP Paribas

“Indian rupee depreciated on weak domestic equity markets and overnight gains in US Dollar. Dismal macroeconomic data from India put downside pressure on Rupee. India Services PMI declined to 55.5 in July from 59.2 in June while and Composite PMI declined to 56.6 from 58.2 during the same period. India’s trade deficit widened to a record low $31.02 billion in July compared to $26.18 billion in June. However, decline in crude oil prices and FII inflows cushioned the downside. US Dollar gained on safe haven appeal geopolitical tensions between US and China on US Speaker Nancy Pelosi’s Taiwan visit. Dollar also strengthened on hawkish statements by Fed officials and they hinted at aggressive rate hikes in the near term. Weak jobs data capped sharp gains in Dollar.”

“We expect Rupee to trade mixed to negative note on weak domestic markets and a strong US Dollar. Disappointing macroeconomic data from India may continue to mount downside pressure on Rupee. However, weak crude oil price and inflows from foreign investors may cushion the downside. Markets may also take cues from ISM services PMI and factory orders from US. Traders may also remain cautious ahead of RBI’s monetary policy outcome towards the end of the week. USDINR spot price is expected to trade in a range of Rs 78.20 to Rs 79.80 in next couple of sessions.”

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