The Indian rupee snapped its four-day losing streak to close 29 paise higher against the US dollar on Tuesday, tracking a recovery in domestic equities and weakness in American currency overseas. At the interbank forex market, the local unit opened on a weak note at 75.60 against the greenback and witnessed an intra-day high of 75.31 and a low of 75.72 before settling at 75.31, up 29 paise over its previous close. However, the surge in the rupee was restricted amid elevated crude oil prices and geopolitical tensions between Russia and Ukraine.
“The rupee is expected to appreciate today due to optimistic sentiments in the domestic markets and weakness in the dollar. Further, easing crude oil prices may continue to provide support to the rupee. However, continuous FII outflows from domestic markets may cap further upside in the rupee. US$INR (February) is expected to correct further towards 75.0 levels for the day,” said ICIC Direct.
Gaurang Somaiya , Forex & Bullion Analyst, Motilal Oswal Financial Services
“Rupee traded with high volatility yesterday as it was under pressure in the first half of the session following increased uncertainty between Russia and Ukraine. But in the latter half the rupee appreciated sharply after reports that some Russian troops are asked to return to its base after completing drills, a move that could de-escalate friction between Moscow and the West. Russia has amassed over 100,000 troops near Ukraine’s borders, prompting fears of an invasion, especially as Moscow’s Feb. 10-20 joint drills with Belarus mean that Ukraine is almost encircled by the Russian military.”
“Volatility could remain elevated for the next couple of sessions until we don’t get clarity on the situation. Fall in the dollar was restricted after U.S. producer prices increased by the most in eight months in January. The data provides further evidence that the Fed could be leaning towards a more hawkish policy. Today, market participants will be keeping an eye on the FOMC meeting minutes and hawkish comments is likely to provide support to the dollar at lower levels. We expect the dollar to trade sideways and quote in the range of 75.05 and 75.50.”
Amit Pabari, MD, CR Forex Advisors
“The Indian Rupee is expected to open around 75.20 today and it is likely to trade in the range of 75 to 75.50 zone. After appreciating sharply by almost 40 paise from the day’s low of 75.70, the local currency may extend its gain today as risk-on sentiment can be seen recovering after de-escalation news from the Russia-Ukraine border. Following this news, stocks in the US and Europe rebounded, the US dollar index retreated off from highs, crude oil prices fell and EM FX strengthened. The volatility is likely to remain high for the day. The way the USDINR pair has reversed its move yesterday suggests a further correction towards 74.80 to 74.50 levels. In the near term, the pair could consolidate in a wide range of 74.50 to 75.70 range. However, the medium-term view remains bullish for the pair.”
USDINR can test 75.00 levels on spot: Kotak Securities
“De-escalation in tensions between Russia and Ukraine triggered a turnaround in risk assets, weakness in the US Dollar Index, fall in oil prices and fall in USDINR as well. USDINR has struggled to rise even when oil prices had surged above $96 and equity markets were under pressure, thanks to robust flows from commercials and lack of panic amongst the carry traders. If global risk sentiment remains buoyant over rest of the week, then USDINR can even test 75.00 levels on spot. However, for prices to sustain at lower levels, oil needs to fall. USDINR can see further downward move, towards 75.00 levels on spot, 75.10 on Feb futures. Upside can remain capped around 75.55/60 levels.”