Rupee likely to depreciate on strong dollar, elevated crude prices; USDINR pair to trade in this range

Rupee likely to depreciate on strong dollar, elevated crude prices; USDINR pair to trade in this range

The Indian Rupee is likely to depreciate to 80 in coming sessions amid strength in dollar, volatility in equity markets, US Fed rate hike and inflation concerns. Rupee has fallen 6.51% against the US dollar so far in 2022. In comparison, Australian dollar has declined 7.5%, Pakistani rupee fell 23.77%, and Japanese Yen slipped 19.79% against the greenback YTD. On Tuesday, Chief Economic Advisor V Anantha Nageswaran had said that India is not defending rupee, and that the Reserve Bank of India is taking necessary steps to ensure that the movement of the rupee is gradual and in line with market trends. Rupee is being managed in a manner that reflects the fundamentals of the economy, he added.

Dilip Parmar, Research Analyst, HDFC Securities

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“The pair is trading within the range of 79.90 to 79.10 with rising volatility indicating consolidation before a directional trend. The confidence in positioning coming back from foreign institutions as the accelerated buying in the domestic equities after the worst sell-off in the last couple of months. The 5-day moving average of net foreign inflows increased to $289.4 million, rising above the 20-day average of $269.2 million, according to data from the Central Depository Services (India) Ltd.”

Anuj Choudhary – Research Analyst, Sharekhan by BNP Paribas

“Indian rupee depreciated by 0.38% yesterday on strong US Dollar and deteriorating global risk sentiments. US Dollar surged as US CPI rose unexpectedly to 8.3% y-o-y in August compared to expectations of 8.1% while core CPI increased to 6.3% y-o-y in August compared to expectations of 6.1%. This raised expectations of yet another aggressive rate hike by FOMC in its September meeting. Apart from increased odds of a 75 bps rate hike, there are talks of even a 100 bps rate hike.”

“We expect Rupee to trade with a negative bias amid risk aversion in global market worries that the US Federal Reserve may be more hawkish than previously expected. Investors may also take cues from PPI data from US today. However, India’s WPI inflation eased to a 11-month low of 12.41% in August which may support Rupee at lower levels. USDINR spot price is expected to trade in a range of Rs 78.80 to Rs 80 in next couple of sessions.”

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

“USDINR spot closed 79.44, up 30 paise, due to strong rally in US Dollar Index and sell-off in equities. However, RBI intervention and FPI flows may have capped the advance beyond 79.60. The sharp drop in the forward premium could be a sign of RBI selling in forwards. Post US CPI, odds of a 100-bps hike next week has increased. These odds can keep USDINR supported till Fed meeting. We expect a range of 79.20 and 79.80 on spot.”

Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors

“USDINR to open flat at 79.50 as the dollar index is at 109.72 US 10-year yields at 3.42 oil is $ 94 per barrel. Asian currencies are still on the weaker side against $ which will not allow the rupee to gain much against the dollar. The range for the day is expected between 79.30 to 79.80 as the market braces in for a 75 bps rate hike by FED on 21st. India’s trade deficit was higher though export figures were also revised to slightly higher. Trade deficit still remains a matter of concern for the country. Exporters to sell above 79.80 while importers to buy below 79.30.”

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