Rupee likely to depreciate on strong dollar, risk aversion in equity markets; USDINR to trade in this range

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The Indian Rupee is expected to depreciate on Thursday, following an overnight hawkish tone from the US Federal Reserve. Higher level selling can be seen in the USDINR pair on RBI intervention, according to analysts. USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 81 in the next couple of sessions. In the previous session, rupee declined against the US dollar, tracking the strength of the American currency in the overseas market and a muted trend in domestic equities. Risk-off mood and firm crude oil prices weighed on the local unit. At the interbank foreign exchange market, the domestic currency opened at 79.81 per dollar, and it settled at 80.00, down 26 paise over its previous close.

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

“Rupee consolidated in the first half of the session but fell in the latter half as market participants remain cautious ahead of FOMC policy statement. The Federal Reserve raised interest rates by another 75 basis points and signalled more large increases at its upcoming meetings. The Fed’s new projections showed its policy rate rising to 4.4% by the end of the year, before peaking at 4.6% in 2023 to curb uncomfortably high inflation.Fed Chairman said there is no painless way to bring inflation down, reiterating that it wants to act aggressively now and keep at it.”

“He added that the Fed’s actions are likely to result in slower growth and higher unemployment. The Fed said that “recent indicators point to modest growth in spending and production,” but the new projections put year-end economic growth for 2022 at 0.2%, rising to 1.2% in 2023, well below the economy’s potential.Today, focus will be on the Bank of England policy statement; expectation is that the central bank could raise rates by another 50bps and a hawkish stance would restrict losses for the currency. We expect the USDINR(Spot) to trade sideways and quote in the range of 79.70 and 80.40.”

Sugandha Sachdeva, Vice President – Commodity and Currency Research, Religare Broking

An overall backdrop of risk aversion due to renewed concerns about the escalation of conflict in Ukraine, and strong gains witnessed in the greenback have pushed the Indian rupee on a lower trajectory ahead of another hefty rate hike by the US Fed. Markets would be closely reacting to economic projections by the US central bank which will provide further direction to the Indian rupee. As the domestic currency is trading just shy of the crucial 80 to the dollar mark, we envisage it to provide a cushion to the local unit. On the contrary, a decisive breach of the 80.10 mark would fuel further depreciation in the rupee-dollar exchange rate.

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

“USDINR spot closed at 79.98, up 23 paise, highest level since 20th July. With US bond yields surging to highest levels since 2007 and US Dollar Index at the highest level since June 2002, USDINR has also closed near 80 handle. Bias remains upward. USDINR can play within a range of 79.50 and 80.30 over the near term.”

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Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas

“Indian rupee depreciated by 0.29% on Wednesday on weak domestic markets and a strong US Dollar. Dollar surged on renewed safe haven appeal after Russian President Vladimir Putin announced partial military mobilsation. The surge in crude oil prices added to the downside pressure on Rupee. Domestic markets surged by about 0.3% lower. We expect Rupee to trade with a negative bias amid deteriorating global risk sentiments post Russian President’s address to the nation and a hawkish US Federal Reserve. Market participants may look for cues on future guidance by the Fed. Investors may also take cues from existing home sales data which is expected weaker than previous reading. USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 81 in next couple of sessions.”