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

20 Sep , 2022   By : Monika Singh

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

The Indian Rupee is expected to depreciate amid strong dollar, elevated crude prices. However, rise in risk appetite in equity markets, and foreign fund inflows is expected to provide some support to the local unit. USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 80.30 in the next couple of sessions, according to analysts. In the previous session, rupee pared its initial gains and settled lower against the US dollar, weighed down by the strength of the greenback in the overseas market. A fall in crude oil prices and foreign fund inflows into equity markets, however, restricted the rupee losses. At the interbank forex market, the local unit opened at 79.70 against the greenback, and ended at 79.81, down 3 paise from its previous close.

“USDINR spot closed 3 paise higher at 79.77 levels. A mostly lackluster day, as demand from oil marketing companies and supply from exporters balanced the market. Over this week, the market moving event will be Fed meeting, where the central bank is expected to hike by 75 bps and sound quite hawkish. We expect an overall range of 79.50 and 80.00 on spot.”

“Indian rupee appreciated by 0.06% on Monday on positive domestic markets and a weak crude oil. However, strong US Dollar capped sharp gains. Domestic markets surged by 0.55% while US Dollar is trading 0.33% higher at 110.129 amid expectations of a hawkish US Federal Reserve. There are rising concerns of an aggressive rate hike in the upcoming FOMC meeting on September 21 on the back of hotter-than-expected inflation. There are rising odds of a big 100 bps rate hike from earlier expectations of a 75 bps rate hike.”

“Overall, we expect Rupee to trade with a negative tone as rate hike expectations are likely to keep the Dollar index strong which will be negative for Rupee. A large rate hike may put pressure on global equities which may lead to outflows by FIIs from emerging markets to the US. However, volatility may remain subdued on absence of any major economic data today. USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 80.30 in next couple of sessions.”

“Rupee continued to consolidate in a narrow range as market participants remain cautious ahead of FOMC policy statement that is scheduled to release later this week. Expectation of a big rate hike pushed the benchmark 10-year Treasury yield to hit its highest in over a decade. Investors heard a hawkish message from Fed Chair Jerome Powell at the Jackson Hole banking symposium in August, but then remained in denial until it became clear inflation was stubbornly high. Most central banks that will be releasing their policy statements are expected to raise rates. Oil prices edged slightly higher in volatile trading as worries of tight supplies outweighed fears that global demand could slow due to a strong U.S. dollar and possible large increases to interest rates. Today, volatility could remain low as no major economic data is expected t be released from the US. We expect the USDINR(Spot) to trade sideways and quote in the range of 79.40 and 80.05.”

“Overnight weakness in the dollar index and stronger Asian currencies indicates a higher opening for the rupee at domestic bourses. The dollar erased its gain as equities rose and Treasury yields advanced amid US corporate bond supply, higher oil and positioning ahead of this week’s Fed decision. The dollar index was last quoted at 109.63 with a loss of one-third percentage. USDCNH is up 0.05% to 7.0166 after touching the high of 7.0257. The People’s Bank of China set the daily reference rate for the yuan at a level stronger than the average estimate in a Bloomberg survey with analysts and traders for the 19th day. Spot USDINR started the week on a positive note and closed at 79.77 with a gain of 3 paise. Trading volumes are subdued ahead of the events. The pair is expected to trade in the range of 79.90 to 79.40 in the near term.”

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