Rupee likely to trade with negative bias next week amid continued FII outflow from domestic equity markets

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By Raj Deepak Singh

The Indian rupee depreciated this week to a new all-time low and touched 82.2875 level amid continued FII outflow from domestic equity markets. However, rupee found some support after the Reserve Bank of India raised its key repo rate by 50 basis points to 5.90% and appreciated towards 81.50. The dollar index also dropped by almost 1.00% after touching a fresh two-decade high at 114.77 last week after the Bank of England conducted bond buying to stabilize financial markets, which triggered profit booking in the US dollar after the recent rally. Further, dollar was pressurised after German Chancellor Olaf Scholz set out a 200 billion euro ($194 billion) package to protect companies and households from the impact of soaring energy prices.

We expect the US dollar to depreciate further in the coming week and break the level of 111.00 to touch 110.40 level amid expectations of a drop in US 10-year treasury yields. We expect rupee to trade with a negative bias next week amid continued FII outflow from the domestic equity markets. Further, rupee may be pressurised by rise in crude oil prices. Moreover, Investors will keep an eye on ISM manufacturing PMI, services PMI, nonfarm payrolls, and unemployment rate data from the US. US unemployment data is expected to remain unchanged at 3.7%

USDINR traded in upward resistance and support wedges and broke resistance wedge to start a new upward trend towards the all-time high of 82.2875. The pair is expected to continue trading in upward trend towards the level of 82.50 after breaking the key resistance level of 82.22 in the coming week. It may consolidate between 82.00 to 82.22 levels before breaking 82.22 level to touch 82.50 level.

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Also Read: Sensex, Nifty snap 7-day losing streak after RBI hikes repo rate; Nifty eyes 17700 with support at 16850

For Monday Rupee may appreciate amid weakness in us dollar index. Further, rupee may be supported by rise in interest rate by RBI from 5.40% to 5.90%. Moreover, investors will focus on ISM manufacturing data from the US, which is expected to remain unchanged at 52.8. USDINR (Sep) is likely to trade towards the level of 81.35.

(Raj Deepak Singh is an Analyst – F&O, Currency, and Commodities at ICICIdirect. The views expressed are the author’s own. Please consult your financial advisor before investing)