Rupee likely to depreciate further on strong US Dollar, elevated crude price, persistent FII outflows

The Indian rupee is likely to depreciate on Thursday amid strong dollar. Further, weak domestic markets, rising crude oil prices and persistent foreign capital outflows may also weigh in on the local unit. Going forward, rupee spot may weaken towards new all-time lows amid weak fundamentals. On Wednesday, rupee settled at 77.74, marginally weaker than its previous close of 77.71, to hit a fresh all-time closing low against the US dollar. The domestic currency traded in a narrow range amid sustained foreign capital outflows and elevated global crude oil prices. The previous record closing low was on May 19, when it ended at 77.73 against the greenback.

Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities

“USDINR spot closed 2 paise higher at 77.73 levels. RBI policy was non-event. RBI is expected to keep raising rates in the upcoming meetings as inflation can remain above its target for the full financial year. USDINR could continue to see low volatility. A range of 77.40 to 78.00 remains in play over the near term.”

Jigar Trivedi, Research Analyst- Commodities & Currencies, Fundamental, Anand Rathi Shares & Stock Brokers

“India’s central bank raised the key policy repo rates by 50 basis points to 4.9%, rising for the second straight month and joined the league of central banks that has increased rates by half points in order to tame the surging inflation. Meanwhile, RBI telegraphed the withdrawal of accommodation going forward and raised inflation forecasts to 6.7% for FY23. Though rate hikes might not help much in the supply side inflation, they could cool down the demand. Going forward, we might see the Rupee spot weakening towards new all-time lows amid weak fundamentals. Elevated crude oil prices, bounce back in the dollar index and persistent FII outflows ahead of FOMC meeting might prompt gradual depreciation in Rupee towards 78.2 levels.”

Rupee to depreciate on strong dollar: ICICI Direct

“The rupee is expected to depreciate today amid strong dollar. Further, it may be pressurised by weak domestic markets, rising crude oil prices and persistent foreign capital outflows. US$INR is expected to trade in upward trend towards its key resistance level at 77.95 and trade in the range of 77.75 to 77.95.”

Amit Pabari, MD, CR Forex Advisors

“As an immediate response to the RBI policy announcement, bond yields moved from 7.50% to 7.54% and then settled at 7.45% levels, equities went volatile, & FII’s were selling; however, USDINR remained in a compressed range of 12 paise. Surprisingly, the bond markets were more volatile than the rupee which remained cold throughout. This signifies RBI’s strong selling pressure that overpowered market forces and kept the pair well below 77.80 levels. Sword is still hanging on rupee amid persistent FII’s selling from EM’s leading to Asian currencies weakening, elevated oil prices, and revised upward inflationary pressure for coming quarters. However, the only ray of hope for rupee presently will remain RBI who has actively and aggressively participated to protect rupee from the heat so far. As long as the pair is trading below 77.80 levels, there remains a hope for 77.40-77.50 levels.”

Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services

“Reaction on the rupee remained muted even after the RBI policy statement wherein the central bank raised rates by 50bps and dropped its “accommodative” stance, signalling stricter tightening ahead to fight soaring inflation. The RBI governor mentioned in his statement that upside risks to inflation as highlighted in last policy meetings have materialised earlier than expected. The hawkish tone on inflation suggests to us that the MPC will continue to frontload policy tightening over the coming months.”

“On the other hand, the dollar again started its upward trajectory following safe haven buying ahead of the ECB policy statement that is scheduled today and CPI number from the US that will be released tomorrow. The ECB is expected to take a hawkish stance and investors are also discounting with interest rate hikes to begin in July. We expect the USDINR(Spot) to trade with a positive bias and quote in the range of 77.40 and 78.20.”

(The recommendations in this story are by the respective research analysts and brokerage firms. Financial does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

Get our latest downloads and information first. Complete the form below to subscribe to our weekly newsletter.