The Indian rupee is likely to depreciate further on Wednesday amid elevated crude price, strong US dollar and risk aversion in domestic markets. Today, focus will be on the manufacturing PMI number from the US, euro zone and the UK. Better-than-expected economic data could extend gains for the dollar, according to experts. In the previous session, the rupee declined to close at its all-time low against the US currency as surging US bond yields dampened the appeal of riskier assets. Losses in the domestic equities, high crude oil prices and forex outflows also weighed on the rupee. At the interbank foreign exchange market, the local unit opened lower at 77.65 against the greenback and finally settled at 77.71, down 17 paise over its previous close.

“USDINR closed higher at 77.64 levels, up 10 paise. Weakness in stocks, rise in oil prices and strength in US Dollar Index drove the pair higher. Over the near term, USDINR may trade with an upward bias. Range expected is 77.40 and 78 on spot.”

“Rupee continued traded in a narrow range but fell marginally ahead of the important GDP number that was released on the domestic front. India’s GDP grew 4.0% in the January-March quarter from a year earlier. The economy’s near-term prospects have been darkened by a spike in retail inflation, which hit an eight-year high of 7.8% in April. At the same time, fiscal deficit worked out to be 6.71% as compared to 6.9% of GDP. The government in the revised estimates in the Budget for 2022-23 forecast a higher fiscal deficit of 6.9% of the GDP.”

“Reaction on the rupee has been muted and this week’s global number is likely to impact the currency. Dollar recovered from its intraday lows ahead of the meeting between US President and Fed Chairman. Recovery in the greenback also has been on back of better-than-expected consumer confidence number from the US. Today, focus will be on the manufacturing PMI number from the US, euro zone and the UK. Better-than-expected economic data could extend gains for the dollar. We expect USDINR(Spot) to trade sideways and quote in the range of 77.05 and 77.80.”

“For now, equity and Fx markets are in a consolidation zone with dollar index unlikely to make any significant gains unless and until some new risk emerges. Oil prices which spiked significantly yesterday saw some cool off overnight while risk sentiments are a bit positive on the significant opening of China’s activity. Today, USDINR is likely to open near 77.57 and trade in the range of 77.30 -77.80. On the domestic front, India’s growth concerns are in focus as the country’s GDP sunk to 4.1% growth in the Q4 FY22.”

“Rising oil prices, slowdown in global growth and the rising interest rate cycle all are creating the headwinds for the economy. Its a tough task for the RBI and govt both to actively manage it well. The central bank has till now effectively used its $650 bn reserves and capped the rupee depreciation beyond 77.85 to avoid any spillover effects on the economy. However, the improving risk appetite and the weaker US dollar index recently might give some relief to the continuous central bank intervention. All the factors above indicates near term appreciation moves in rupee towards 76.80 -77.10.”