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Rupee opens higher, likely to depreciate in near-term; USDINR may breach 82 level again in coming days

15 Nov , 2022   By : Monika Singh

Rupee opens higher, likely to depreciate in near-term; USDINR may breach 82 level again in coming days

The Indian Rupee opened higher on Tuesday, driven by a lower inflation reading and cues of an overnight pullback in oil prices and positive Asian currencies against the US dollar. Rupee was last changing hands at 81.30 per dollar after opening at 81.11, up from its previous close of 81.26, according to Bloomberg data. In the previous session, rupee depreciated against the US dollar on Monday, tracking the recovery in the American currency and a muted trend in domestic equities. Rising crude oil prices also weighed on investor sentiments. At the interbank foreign exchange market, the local unit opened on a strong note at 80.53, but pared gains and finally settled at 81.26 against dollar, registering a fall of 48 paise over its last close.

USDINR spot closed 45 paise higher 81.26 on spot, on the back of bunched up $ outflows. Some stops were triggered once spot traded above 81.10 levels and that kept the upside pressure intact. Over the remainder of the week, USDINR could see further up move, if the spot manages to trade and sustain above 81.50 levels. We expect a range of 81.00 to 82.00 on spot.

“The Indian rupee has plunged lower by around 0.60% amid the renewed strength seen in the dollar index against its peers at the beginning of the current week. Besides, the major reason behind the sharp depreciation in the domestic currency is the strong demand from oil importers as a bargain buying opportunity after the steep decline of around 4% witnessed in the dollar last week. A softer-than-expected CPI data for October (YoY) has raised hopes that inflation in the US has peaked and that the US Fed is near the end of its rate hike cycle, but comments from a Fed official have dampened the hopes while pushing treasury yields and the greenback on a higher incline. Going forward, markets are closely eyeing the domestic CPI print for October, along with US retail sales data. We reckon the Indian rupee to move in a band of 80-82 mark in the coming days.”

“The price action of the past two trading sessions clearly suggests heavy buying in onshore as the USDINR moved quite sharply from 80.50 to 81.25 levels. This buying is likely by oil companies, defense payments and also RBI seemed to have intervened to curb the sharp rise in rupee. Well with the retail inflation easing to 6.77% in October, the lowest in three months, it will be interesting to watch the RBI stance in the upcoming meeting. Overall, with domestic inflation coming under control, RBI shall have a limited scope of hiking V/s the Fed and could be another factor for a limited strength the rupee. In the current phase, it seems like USDINR is forming a broad range between 80.50-82.20 levels where dips shall be bought and upticks will be sold.”

The dollar index stood at 107 levels while US 10 year yields were at 3.86?ter some slightly hawkish comments by FED officials. Brent oil was at $ 92.56 per barrel. Asian currencies were relatively stable with Yuan around 7.0566 levels and KRW at 1325 levels. The range for Rupee is expected to be 80.75 to 81.50 for the day. Yesterday, the RBI Governor in an interview said that they had accumulated reserves for a rainy day and have now been selling $ to prevent a massive depreciation. He also very clearly said that they will prevent excessive depreciation and appreciation of rupee by selling and buying dollars respectively. From yesterday’s movement of rupee, it is expected that exporters may get slightly higher levels to sell while importers may wait for 80.50 levels to hedge. Not expecting rupee to go above 80 levels.

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