Rupee opens lower, may depreciate further on strong dollar, elevated crude prices and risk aversion in markets

Rupee opens lower, may depreciate further on strong dollar, elevated crude prices and risk aversion in markets

Rupee depreciated on Monday as it opened 24 paise lower at 81.58 per dollar amid rising crude prices, risk aversion in equity markets, strong dollar and weak Asian peers. In the previous session, rupee extended its initial gains and settled 37 paise higher at 81.36 against US dollar, after the Reserve Bank of India raised the benchmark lending rate by 50 basis points. At the interbank forex market, the local unit opened at 81.60 against the greenback, and ended at 81.36, up 37 paise from its previous close. Rupee has fallen to around Rs 81.50 from roughly Rs 73.21 a year ago, a decline of about 9.5%. In other words, over the past 12 months, the US dollar has appreciated 9.5% against the Indian rupee.

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“Rupee retraced from its all-time lows after the RBI raised rates by 50bps, the fourth straight increase, as policymakers extended their battle to tame stubbornly high inflation. The RBI has now raised rates by a total 190 basis points since its first unscheduled mid-meeting hike in May. The U.S. Federal Reserve’s relentless and aggressive rate hikes over recent months to curb inflation have battered the rupee, and most other emerging and developed market currencies. The MPC lowered its GDP growth projection for financial year 2023 to 7% from 7.2% earlier, while its retail inflation forecast was held steady at 6.7%.”

“Data released on Friday showed FX reserves fell to $537.52 billion in the week through Sept. 23, notching their steepest weekly fall in six months. The RBI governor in his commentary mentioned that about 67% of the drop in reserves during the current financial year was due to valuation changes as the U.S. dollar strengthened. Today, focus will be on the ISM manufacturing number that will be released from the US; better-than-expected data could extend gains for the dollar. We expect the USDINR(Spot) to trade sideways and quote in the range of 81.20 and 81.80.”

Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas

“Indian rupee appreciated by 0.42% on Friday on sharp rise in domestic equity markets as RBI hiked repo rate by 50 bps to 5.9%. Rupee also appreciated on reports that the central bank is encouraging state-run refiners to reduce dollar buying and has been asked to lean on a special credit line. India’s current account deficit rose to $23.9 billion in Q1 FY23. Though it is higher than $13.4 billion in the previous quarter, it was much better than estimates of $30.5 billion. Weak US Dollar also supported Rupee. Dollar index is trading 111.848 (-0.36%).”

“We expect Rupee to trade with a positive bias on jump in domestic equities and rise in risk appetite in European markets. Weak US Dollar and overall weak tone in crude oil prices may also support Rupee. However, concerns over global economic recovery may cap sharp upside. Investors may also remain cautious ahead of Core PCE Price Index, Personal Income and Chicago PMI from US. USDINR spot price is expected to trade in a range of Rs 80.30 to Rs 82.50 in next couple of sessions.”

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Amit Pabari, MD, CR Forex Advisors

“The impact of RBI policy on the Rupee remained muted as RBI didn’t surprise any new tool for liquidity or borrowing. However, in the final hour of the interbank trading, RBI surprisingly asked state-run refiners (IOCL, HPCL, BPCL) to lean on the $9 bln credit line instead of the spot market for dollars. This resulted in a sharp appreciation in Rupee from 81.50 to 81.15, but weekly, monthly, quarterly and financial half-yearly closing resulted in a strong dollar demand, which took it back to 81.45. Overall, we expect the USDINR pair to remain well supported near 81-81.20 levels. On the flip side, 82 will act as a crucial resistance. If that is taken out then we could see a sharp jump towards 83 in a short span of time.”

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