Rupee likely to depreciate on strong dollar, risk aversion in markets; USDINR pair to trade in this range_1

Rupee likely to depreciate on strong dollar, risk aversion in markets; USDINR pair to trade in this range

The Indian rupee is expected to depreciate on Wednesday amid a strong dollar and risk aversion in global markets. Further, persistent FII outflows may hurt the rupee. Investors will remain vigilant ahead of RBI’s monetary policy, where the central bank may slow down the pace of rate hikes. The rate hike is expected to be in the range of 25-35 bps. Market participants will also focus on statements from the central bank to get hints on future monetary stance. “US$INR (December) may trade in a range of 82.25-82.85,” said ICICIDirect. In the previous session, rupee crashed, following the dollar’s greatest surge in two weeks. After opening at 81.91 per dollar, the rupee fell to 82.60.

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“USDINR spot closed at 82.62, up 81 paise, highest levels since 4th November, on the back of unwinding of carry trades and corporate dollar demand. Once the spot crossed 82, stops may have been triggered by importers and bank dealers and that accentuated the rise. USDINR forward premium is trading at the lowest levels since 2011 and low forward premiums are hurting dollar supply. It is making carry trade unviable and also reducing exporter hedging. At the same time, it is making Rupee vulnerable to global shocks. Indian Rupee has become one of the weakest currencies across a broad basket of currencies on a year to date basis. However, over the near term, we expect central bank intervention to emerge at higher levels and as a result a range of 81.80 and 83.00 may unfold over the near term.”

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

“Rupee continued to remain under pressure and yesterday’s weakness was triggered on expectation of defence-related buying and at the same time dollar started to rebound after falling in the last few weeks. On the domestic front, market participants are cautious ahead of the RBI pokicy meeting that is scheduled for release today. Expectation is that the central bank could raise rates by 35bps and be little less hawkish in its statement. Recent economic numbers released from the US have been better-than-estimates and that added to gains for the dollar. Today, focus will be on the GDP number that will be released from the EZ and Japan. We expect the USDINR(Spot) to trade sideways and quote in the range of 82.20  and 82.80.”

Amit Pabari, MD, CR Forex Advisors

“The momentum of USDINR will largely be guided by RBI’s policy at 10 am. Overall, a medium-term broad range remains between 80.50-83.20, and levels above 82.50 shall remain a good selling opportunity. However, based on a stable domestic outlook and subdued oil prices, the pair is likely to again move towards 81.50 levels.”

Also Read: RBI MPC meet December 2022: When and where to watch policy statement and press conference live today

Aditi Gupta Cheif Economist, Economics Research Department, Bank of Baroda

“While the rupee outlook remained murky for most part of the year, it appears much more promising in the light of recent developments. One of the major factors for rupee depreciation has been the dollar strength. There are signs that it may be abating. DXY is down 7.1% from its peak in CY22 and the future upside may be limited. With the Fed clearly signaling a slowdown in its rate hike cycle and with much of the rate hikes already priced in, the dollar rally is likely to stall. This is likely to lend further support to rupee. Overall, we continue to believe that rupee will remain in the range of 81-82/$ in the near-term.

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