Rupee likely to depreciate on strong dollar, risk aversion in markets, weak Asian peers; USDINR may hit 81

Rupee likely to depreciate on strong dollar, risk aversion in markets, weak Asian peers; USDINR may hit 81

The Indian rupee likely to depreciate on Friday amid risk aversion in equity markets, weak Asian peers, and strong dollar. Spot USDINR now has resistance in the area of 81.25 to 81.40, according to analysts. In the previous session, rupee tanked to close at an all-time low against the US dollar after the US Federal Reserve’s interest rate hike and its hawkish stance weighed on investor sentiments. The US Fed’s rate hike and escalation of geopolitical risk in Ukraine led to sapped risk appetite which weighed on the domestic unit, according to Forex traders. At the interbank foreign exchange market, rupee opened at 80.27, and ended at 80.86, down 90 paise over its previous close.

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“The Indian rupee is expected to open slightly lower and may face resilience around 81 in anticipation of the central bank’s intervention. However, the direction will depend on broad-based dollar movement. The forward market is indicating that USDINR could open around 80.95. Spot USDINR now has resistance in the area of 81.25 to 81.40, while the previous top 80.12 is likely to act as support. Asian stocks headed for a sixth weekly decline following another day of losses for US shares and surging Treasury yields that underscore expectations for tighter monetary policy and a slowing global economy.”

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

“USDINR spot closed at 80.86, up 89 paise, to all-time high. Post super hawkish Fed and sell-off in equity markets, there was significant unwinding of shorts in the dollar. The central bank seems to have not intervened aggressively. However, in the coming sessions, we expect RBI to step in and contain volatility. Therefore, a range of 80.40 and 81.20 can be seen.”

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

“Rupee fell to fresh all-time lows following a surge in the dollar after the Fed raised interest rates by another 75 basis points and signalled more large increases at its upcoming meetings. The Fed’s new projections showed its policy rate rising to 4.4% by the end of the year, before peaking at 4.6% in 2023 to curb uncomfortably high inflation. Fed Chairman said there is no painless way to bring inflation down, reiterating that it wants to act aggressively now and keep at it. Yen fell after the Fed policy statement and also after the Bank of Japan maintained a dovish stance. The BoJ came in to support the yen soon after Europe opened.”

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“Volatility and uncertainty have risen as the market comes to grips with a policy regime that is reducing liquidity after a decade of abundance. Apart from BoJ, the Bank of England released its policy statement and raised rates by another 50bps and said it would continue to “respond forcefully, as necessary” to inflation, despite the economy entering recession. The BoE now expects inflation to peak at just under 11% in October, below the 13.3% peak it forecast last month. Today, focus will be on preliminary manufacturing PMI number from the US, EZ and the UK. We expect the USDINR(Spot) to trade sideways and quote in the range of 80.70 and 81.20,” Somaiya added.

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