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Rupee to depreciate on strong dollar, pessimistic global market sentiments; USDINR pair to quote sideways

The dollar index, which gauges the dollar’s strength against a basket of six currencies, was trading 0.01 per cent down at 94.78. In the weak gone by, rupee has gained against the US dollar.

Rupee vs USD
USDINR pair to trade sideways with a positive bias and quote in the range of 74.05 and 74.50."

The Indian rupee on Friday slumped 25 paise to close at 74.15 (provisional) against the US dollar, as muted domestic equities and elevated crude oil prices dampened investor sentiments. The local unit fell following more hawkish comments by Federal Reserve officials At the interbank foreign exchange market, rupee witnessed an intra-day high of 74.05 and a low of 74.21 against the US greenback before finally settling at 74.15, down 25 paise over its previous close of 73.90. The dollar index, which gauges the dollar’s strength against a basket of six currencies, was trading 0.01 per cent down at 94.78. In the weak gone by, rupee has gained against the US dollar.

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

“Rupee for the week consolidated in a narrow range and market participants remained cautious ahead of the important inflation and industrial production number that was released during the week. Data showed inflation on the domestic front rose sharply to 5.59% in the month of December from 4.91% in November, pushed up by rising prices of manufactured items. Food inflation has also increased to 4.05% in December from 1.87% in November. On the other hand, industrial production for the month of November grew by 1.4% as compared to (-)1.6 % in the same month last year. On Friday, dollar rose despite weaker-than-expected retail sales number that was released from the US. Retail sales fell 1.9% last month, the largest decline since February 2021, after rising 0.2% in November. Sales could weaken further in January as Omicron limits consumer traffic to places like restaurants and bars, though some market participants expect goods spending to increase as people stay at home. We expect the USDINR pair to trade sideways with a positive bias and quote in the range of 74.05 and 74.50.”

Rupee to depreciate on strong dollar, pessimistic global market sentiments: ICICI Direct

“Rupee future maturing on January 27 depreciated by 0.25% majorly on the back of surge in crude oil prices, muted domestic market and FII outflows. The rupee is expected to depreciate on strong dollar and pessimistic global market sentiments. Further, the Indian currency may slip on elevated crude oil prices and persistent FII outflows. Investors may fear that surge in crude oil prices will lead to rise in inflation and even impact current account deficit. Additionally, market will keep a eye on talks between US and Russia over rising tension in Ukraine.”

Kshitij Purohit, Lead Commodity & Currency at CapitalVia Global Research

In recent weeks, India’s foreign exchange reserves have been dwindling. Reserves fell $897 million to $632.7 billion in the week ending January 7 as the Reserve Bank sold dollars to fulfil demand. According to the latest Reserve Bank figures, both foreign currency assets and the value of gold in reserves fell by $497 million and $360 million respectively over the week. The dollar index, which measures the strength of the greenback against a basket of six currencies, was down 0.01% at 94.78. Meanwhile, the global oil benchmark, Brent crude futures, rose 1.01% to USD 85.32 a barrel.

On Monday, the dollar held on to a late-week rally as investors braced for the Federal Reserve’s meeting in January, raising betting that it will chart a year ahead with numerous rate hikes, while China surprised observers with a benchmark drop. The developments come as the dollar and U.S. yields also rose on Friday, underscoring the greenback’s support from the hawkish rate outlook, even if gains have slowed. The US dollar index, which had been falling steeply until Friday’s surge, was trading at 95.225 in Asia today.

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