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Rupee to depreciate further this week on strong dollar, persistent FII outflows; USDINR to trade in this range

Rupee to depreciate further this week till 79.80 amid strong dollar and persistent foreign funds outflow. However, investors will remain vigilant ahead of major economic events from US like services PMI, employment change and nonfarm payrolls data.

Rupee to depreciate further this week on strong dollar, persistent FII outflows; USDINR to trade in this range
USDINR (June) as long as it sustains above 78.60 level it may rise till 79.80 level this week

By Raj Deepak Singh

Rupee depreciated last week amid strong dollar and weak domestic stock markets. The rupee plunge continued for three quarters in a row now, falling to a new record low of 79.53. Dollar index edged higher amid as policymakers promised further rapid interest rate hikes. Federal Reserve policymakers on Tuesday promised further rapid interest rate hikes to bring down high inflation, but pushed back against growing fears among investors and economists that sharply higher borrowing costs will trigger a steep downturn. Further, dollar was supported by hawkish comments from Jerome Powell.

U.S. Federal Reserve Chairman Jerome Powell said the biggest risk to the U.S. economy is persistent inflation and not that interest rate hikes will slow the economy too much. However, sharp upside was capped on weak GDP data. The US economy contracted an annualized 1.6% on quarter in Q1 2022, slightly worse than a 1.5% drop in the second estimate. We expect rupee to depreciate further this week till 79.80 amid strong dollar and persistent foreign funds outflow. However, investors will remain vigilant ahead of major economic events from US like services PMI, employment change and nonfarm payrolls data. Nonfarm payrolls in the United States is expected to decline from 390k to 250k and services PMI is expected to decline from 55.9 to 55.7

USDINR (June) as long as it sustains above 78.60 level it may rise till 79.80 level this week. For Monday Rupee may continue with its depreciation mode amid strong dollar. Further, rupee may be pressurised by weakness in domestic stock markets. However, sharp downside may be prevented by falling crude oil prices. As long as USDINR (June) sustains above 78.90 level it may rise further till 79.30 level.

(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)

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