Rupee likely to trade volatile amid risk aversion in equity markets; USDINR to trade sideways in this range

Rupee likely to trade volatile amid risk aversion in equity markets; USDINR to trade sideways in this range

Rupee is likely to remain volatile on Wednesday amid risk aversion in global markets, falling crude prices. USDINR(Spot) is expected to trade sideways and quote in the range of 79.40 and 80.05, according to forex analysts. In the previous session, rupee consolidated in a narrow range and settled higher against the US dollar as investors await the US Fed’s policy statement for further cues. At the interbank forex market, the local unit opened at 79.70 against the greenback, and ended at 79.74, up 7 paise from its previous close. Note that RBI has been intervening to protect the rupee which has run down currency reserves. India’s foreign exchange reserves have declined by $90 billion from their September 2021 peak of $641 billion, a drop of 13.9%, according to RBI data.

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“Globally, USD was seen dominating as US 10-year real yields quoted at the highest levels since 2011. It’s time to be cautious about riskier assets and currencies as they become highly unattractive due to the flight of capital towards safe-haven treasuries. It will be a testing time for central bankers as they have to control both currency and inflation with the cost of reserves and growth. Today, the Indian Rupee is likely to trade in a choppy range of 79.60 to 80.00. If the Rupee depreciates sharply beyond the All-time-low of 80.10 post Fed meeting, then RBI will be in vigilant mode. Overall, Fed could be one of the events for the breakout from 2 months old 79 to 80.10 zone.”

Dilip Parmar, Research Analyst, HDFC Securities

“Risk assets are having a rough session in Asia amid the dollar’s strength before the pivotal FOMC session later tonight. The weak Asian currencies and forward markets indicate USDINR could open 10 -12 paise higher opening at domestic bourses. On Tuesday, USDINR fluctuated in a narrow range with low volume as mood remains cautious ahead of the important event of the FOMC rate decision. The pair closed at 79.76 with losses of 2 paise. The bias remains bullish as long as the pair trades above 79.40 while crossing 79.90 will open for a new high.”

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

“Rupee consolidated in a narrow range as market participants remain cautious ahead of the FOMC policy statement that is scheduled to release later today. Expectation of a big rate hike has pushed the benchmark 10-year Treasury yield to hit its highest in over a decade. Fed is likely to hike rates by 75 bps as it continues to fight inflation. Money markets are fully pricing in a 75 basis point rate hike, with the chance of a larger full-point rate hike fading to just 16%. The closely watched gap between two- and 10-year yields earlier reached a discount of as much as -47.5 bps, approaching its most negative since Aug. 10.”

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“Focus will also be on the updated economic projections and dot plot estimates for cues on policymakers’ sense of the endpoint for rates and the outlooks for unemployment, inflation and economic growth. Pound remained under pressure and is hovering barely above its lowest level since 1985, ahead of expected interest rate hikes from the Bank of England and Federal Reserve. We expect the USDINR(Spot) to trade sideways and quote in the range of 79.40 and 80.05.”