The Indian Rupee is likely to depreciate on Friday on firm dollar, risk aversion in global markets. Persistent FII outflows will also weigh in on the domestic unit. A fall in EM & DM FX against USD will keep rupee off the track, according to analysts. USDINR will remain bid above 77 levels on spot. However, it would require even more dollar weakness to take USDINR above 78 levels. Snapping its two-day winning streak, rupee slumped against the US dollar in previous session, following risk-off sentiments amid increasing concerns over inflation globally. Weak domestic equities, surging US dollar in overseas markets and persistent foreign fund outflows also weighed on the rupee which plunged to its all-time intra-day low of 77.63 before settling at settled at 77.40 against the greenback, down by 15 paise over its previous close.
Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services
“Rupee remained under pressure and fell to fresh all- time lows as broader strength in the dollar continued. On the domestic front, market participants remained cautious ahead of the important inflation number that was released yesterday. Data showed inflation rose 7.79% on an annual basis in the month of April owing to higher edible oil & fuel prices. Food inflation, which is driving the rise in retail inflation, rose by 8.38%, the highest so far in this fiscal. April’s print was higher than 6.95% in the previous month and 4.23% a year ago. The greenback rose to fresh 20-year high levels after inflation data released from the US came in higher.”
“Major crosses remained under pressure after data released from the UK showed the economy unexpectedly shrank in March, marking a weak end to the first quarter of a year when the risk of recession is looming and increasing pressure on the government to offer more support to inflation-hit households. GDP fell 0.1% from February, hurt by a slump in car sales due to supply-chain problems. Today, investors will be keeping an eye on the preliminary consumer sentiment number to gauge a view for the dollar. We expect USDINR(Spot) to trade sideways with a positive bias and quote in the range of 77.20 and 77.80.”
Praveen Singh- AVP, Fundamental currencies and Commodities Ananlyst, Sharekhan by BNP Paribhas
“Indian Rupee traded on a weak note yesterday and touched a record-low of 77.6350 on a sharp fall in domestic equity markets and a stronger Dollar. Concerns over global economic recovery and sustained FII selling also put downside pressure on the Rupee. FIIs remained net sellers for the eighth consecutive session as on Wednesday, and sold about Rs 3,609 crore. However, reports of RBI intervention in the forex markets to defend the Rupee prevented sharp downside in Rupee. Decline in global crude oil prices and softening US yields also cushioned the downside to some extent.”
“Rupee is expected to remain weak on risk aversion in global markets and FII outflows from the domestic markets. Concerns over global economic recovery and worries about lockdown in China may weigh on Rupee. Chinas continues with the lockdowns and confinements despite easing Covid cases. Geopolitical tensions due to the Russia-Ukraine war may also put downside pressure on Rupee. However, weak crude oil prices and intervention by the RBI may support Rupee at lower levels. Rupee may trade in the range of 76.80-78.20 in next couple of sessions.”
Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities
“USDINR had a choppy day in spite of a stellar run in the US Dollar against key currencies globally and equity markets taking it on the chin. There are no prizes for calling out who is the owner of the invisible force that kept Rupee so disciplined. Indian macro data is net negative with CPI inflation spiking to an eight-year high at 7.8% and IIP rising barely 1.9%, though on a very high base. However, offshore markets are not bidding on the Rupee, which could be due to suspected RBI intervention over there as well. However, as long US Dollar remains strong, USDINR will remain bid above 77 levels on spot. However, it would require even more dollar weakness to take USDINR above 78 levels. Bias continues to be upward.”
Amit Pabari, MD, CR Forex Advisors
“After extending its all-time-low towards 77.62 levels, the Indian Rupee was seen once managed by RBI as it was seen recovering back sharply upto 77.37 levels. Although, weaker global sentiment, a fall in EM & DM FX against USD will keep Rupee off the track. Today, the USDINR pair is expected to open around 77.35 and is likely to trade in a range of 77.10 to 77.60 zone. It is surely a bloodbath on the D-street as rising interest rate globally is spooking the investor’s sentiment. For the month, FIIs have sold almost Rs. 16,000 crores worth of stocks and bonds.”
“On the data front, domestic inflation rose to 7.79% as widely expected and hit the highest level since May-2014. Amid rising inflation and RBI’s hawkish tone, the yield was seen jumping towards 7.50%. However, the government’s requirement from RBI to either buy back government bonds or conduct Open Market Operation (OMO) took yields off from their highs. Overall, RBI’s active intervention in bonds and forex is likely to remain high and we could see volatility spiking day by day. Broadly, the USDINR pair is likely to trade in a wide range of 76.50 to 78.50 with a bullish bias.”
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