The rupee is expected to depreciate further today, due to rising crude oil prices and stronger dollar. Additionally, risk aversion in the global markets may strengthen the dollar further.
The rupee plunged by 24 paise against the US currency at close on Friday amid fears of an aggressive rate hike by the Federal Reserve after US inflation raced to a 40-year high in January. Muted domestic equities, sustained foreign fund outflows and elevated crude oil prices also weighed on the local unit. At the interbank foreign exchange, rupee opened at 75.40 against the greenback. It witnessed an intra-day high of 75.27 and a low of 75.46 before finally settling at 75.39, down 24 paise from the previous close.
“The rupee is expected to depreciate further today, due to rising crude oil prices and stronger dollar. Additionally, risk aversion in the global markets may strengthen the dollar further. Inventors will now keep an eye on WPI inflation data from India. US$INR (February) is expected to rise further towards 75.80 levels,” said ICICI Direct in its report. The rupee became the worst-performing currency among Asian peers due to policy divergence, broad-based strength in the American currency, risk-averse sentiments and foreign fund outflows
Gaurang Somaiyaa , Forex & Bullion Analyst, Motilal Oswal Financial Services
“Rupee traded in a narrow range but fell sharply on the NDF as investors worry about deepening tensions between Russia and Ukraine. Investors already are worried about inflation and rising interest rates, selling in US equities accelerated after US warned that Russia had massed enough troops near Ukraine to launch a major invasion, and that an attack could begin any day. Investors are pricing in a half-point rate hike in March with just a scant chance of a smaller quarter-point raise, and heavy bets for a policy path that would bring rates to a range of 1.75%-2.00% by the end of the year.”
“During the weekend, Ukraine has called for a meeting with Russia and other members of a key European security group over the escalating tensions on its border. Some Western nations have warned that Russia is preparing for an invasion, with the US saying it could begin with aerial bombardments “at any time”. More than a dozen nations have urged their citizens to leave Ukraine, and some have pulled embassy staff from the capital. The dollar has risen against its major crosses as uncertainty remains on the rise. In the next few sessions, market participants will be awaiting for more clarity on the ongoing uncertainty and that is likely to provide cues to most of the currencies. We expect the USDINR(Spot) to trade with a positive bias and quote in the range of 75.20 and 75.80.”
Heena Naik, Research Analyst-Currency, Angel One Ltd
“In Friday’s session, the USDINR spot made a gap up opening at 75.38 levels from the previous close of 74.93 levels. After opening it straightaway moved in the bullish territory towards 75.41 levels. On the other hand, USDINR Feb Futures too made a high of 75.65 levels. The prime reason for this upward trend could be attributed to the rally seen in the offshore NDF market along with some suspected corporate dollar buying.”
“Moreover, the US Dollar Index too remained in the bullish territory after the release of US CPI data that showed the highest inflation since 1982. Going forward, we expect both USDINR Spot (CMP: 75.34) and USDINR Feb’22 Futures (CMP: 75.45) to continue their upward trend and move towards 75.70 and 76.10 levels respectively.”
Aanindya Banerjee, Currency Derivatives, Kotak Securities
“Escalating tension between the West and Russia over Ukraine has pushed Brent crude oil, closer towards the 100 mark, right now at $95.60, the highest level since September 2014. Add to that the growing expectation of a 50-bps rate hike from the US Fed in next month’s FOMC, there is a double negative brewing for the Indian Rupee.”
“However, the Rupee has been resilient due to factors like healthy commercial flows (FDI+ECB) and positive real rate differential between the Rupee and the US Dollar. It has been seen that it’s when this differential turns significantly positive in favour of $, the risk of a large depreciation increases. Bias is upward as long as prices sustain above 75.00 on spot. Focus on bullish strategies with a closing stop below 75.00 as a spot reference.”
Kshitij Purohit, Lead Commodity & Currency at CapitalVia Global Research
“After the Reserve Bank of India announced a “super-dovish” bi-monthly policy, the cost of currency risk insurance plummeted. Forwards premia across maturities fell by as much as 60 basis points in just two trading days, potentially helping foreign investors and local borrowers/importers with offshore liabilities immediately ahead of the LIC of India’s major share sale. Following the release of the US Consumer Price Index data on Thursday, which raised concerns in financial markets, the USD/INR is seeking to break higher, with the US dollar being the strongest of the major currencies.”
The Federal Reserve’s James Bullard’s hawkish comments have further bolstered expectations for a 50-basis point rate hike in March. Bullard’s brash comments, in which he stated that the data had made him “dramatically” more hawkish, had sent US Treasury yields higher. Technically, USD/INR is forming “Double Bottom” candlestick chart pattern on daily charts. We may witness prices testing support in 75.05-75.00 zone, which is the neckline of this pattern, prior to any significant breakout. While on the upside, prices may get challenged in 75.58-75.60 zone.”
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