Rupee may depreciate further amid stronger US dollar; Dollar index expected to rise till 102

Rupee may depreciate further amid stronger US dollar; Dollar index expected to rise till 102.6

By Raj Deepak Singh

Rupee depreciated last week and touched 82.32 level amid rebound in US dollar and risk aversion in global markets. Meanwhile, sharp drop in crude oil prices helped local currency to restrict the declines. The dollar index bounced off from its calendar year lows as rate cut expectations during the later part of the year took the backseat. Further, dollar was supported as the University of Michigan consumer sentiment for the US, unexpectedly increased to 63.5 in April 2023, as consumer sentiments improved among lower-income households and raised hopes of economic recovery. However, Dollar lost its ground after the Philadelphia manufacturing index fell for the eight consecutive month in April suggesting expectations for growth over the next six months remain subdued.

We expect the dollar index to rise further till 102.60 level on rising hopes that the Federal reserve may hike interest rates further in its May meeting as well. Money markets now pricing in a roughly 86% chance of a 25 basis point hike in May month. Further, mounting global recession worries will put a lid on risk appetite, which will increase the demand for safe havens like dollar.

We expect Indian Rupee to depreciate further amid a stronger US dollar and risk aversion in global markets. USDINR rebounded from a 4 weeks low and touched a 1-week high level at 82.32. Technically, it is trading in a downward resistance and support wedges by making lower low lower high pattern. The pair is likely to break the level of 50 EMA at 82.24 to continue its upward trend towards the resistance level of 82.50 in the coming trading sessions. For Monday Rupee future maturing on April 26th may depreciate further till 82.30 levels as long as it sustains above 82.13 levels amid strong US dollar and risk aversion in global markets.

(Raj Deepak Singh is Analyst – Commodity, Currency, & Derivatives at ICICIdirect. Views expressed are author’s own.)