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Rupee to depreciate further on strong dollar, recession fears, USDINR may head towards 83 in coming sessions

29 Sep , 2022   By : Monika Singh

Rupee to depreciate further on strong dollar, recession fears, USDINR may head towards 83 in coming sessions

The Indian Rupee is expected to depreciate further amid strong dollar, risk-off sentiments in markets. USDINR pair is expected to head towards 83 in coming sessions. In the previous session, the rupee ended at a fresh record low of 81.94 against the US dollar amid a spike in US bond yields. The domestic currency has already depreciated around 9% against the greenback so far in the calendar year 2022. The US Dollar Index, which measures the strength of the American currency against a basket of other major currencies, hit a new multi-year high of 114.78 after a White House official ruled out a currency agreement to weaken the greenback. The yield on the US 10-year Treasury touched 4% for the first time since 2010.

“The Indian Rupee could open higher taking cues from stronger regional peers and overnight weakness in the dollar index with a fall in US treasury yields. The rebound in risk assets also supports the local unit. On Wednesday, spot USDINR closed at 81.94 after touching an intraday record high of 81.96. Technically, the pair has been highly overbought on the daily chart warranting near-term consolidation and profit booking. The pair is having support at 81.10 and resistance at 82.”

“Indian rupee depreciated by 0.48% and touched a fresh all-time low of Rs. 81.9525 on Wednesday on weak domestic equity markets and a strong US Dollar. The dollar index rose to a fresh 2-decade high of 114.764 on risk aversion in global markets. We expect Rupee to trade on a negative note as risk-off sentiment in global markets. Global risk sentiments deteriorated on rising worries over global economic recession and inflation. However, weak tone in crude oil prices may prevent sharp fall in Rupee. Investors may remain cautious ahead of RBI’s monetary policy meeting. RBI is expected to rise interest rates by 50 bps. Dollar may also take cues from goods trade balance and pending home sales data from the US. USDINR spot price is expected to trade in a range of Rs 81.20 to Rs 83 in next couple of sessions.”

“The Indian rupee nose-dived to a fresh record low of 81.95 mark amid the risk-averse mood in the markets, the slide witnessed in the domestic equities, and the advance in the greenback close to the crucial 115 mark, a more than 20-year high. The US Fed has indicated that borrowing costs will keep rising and stay elevated for a long time until inflation looks well under control, which has provided a huge upthrust to the dollar index. Besides, the US central bank raising rates at a faster clip as compared to the other major central banks is propelling the mighty dollar on an upwards incline.”

“The greenback has surged around 19.50 percent for the year. Most of the Asian currencies, including the local unit, are reeling under pressure amid the monetary tightening campaign in the West and concerns about a global economic slowdown. Limited intervention by the RBI amid declining forex reserves is also leading to the current bout of selling spree witnessed in the Indian rupee. However, softening crude prices and strong underlying fundamentals of the domestic economy shall underpin the rupee-dollar exchange rate around the 82 to the dollar mark. All eyes are now on the RBI monetary policy outcome for further cues.”

“Rupee fell to fresh all-time lows yesterday but traded in a narrow range as market participants remained jittery following central bank action in the last few sessions and as UK government fiscal plans continued to roil markets. The BoE said it received £2.587 billion worth of offers in its first bond buyback operation aimed at stabilizing the market, and had accepted only £1.025 billion worth. The central bank had committed to buying as many long-dated government bonds, know as gilts, as needed between 28th September and Oct. 14.”

“The relief for sterling may be temporary as the UK still has to deal with macro trends such as high inflation. . On the domestic front, focus will be on the RBI policy statement expectation is that the central bank could continue to raise rates and maintain a hawkish stance. What the central bank stance is going ahead on rates, growth and inflation will provide cues to the rupee. Today, focus will be on the final GDP number that will be released from the US; better-than-expected data could extend gains for the dollar. We expect the USDINR(Spot) to trade sideways and quote in the range of 81.20 and 81.80.”

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