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

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The Indian rupee is expected to depreciate on Wednesday amid strong dollar, FII outflows, and risk-off sentiments in equity markets. The delay in Indian bond inclusion in the JP Morgan bond index is also likely to weigh on the local unit. Analysts expect USDINR pair to trade within a broad range of 81.00 and 81.80 levels on spot. In the previous session, the rupee eased off a record low as oil prices hovered near an eight-month low and risk aversion eased somewhat. The currency halted its four-day losing streak to close at 81.58, up 9 paise from the previous close.

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“The Indian rupee is expected to open lower following the weak Chinese yuan and risk-off sentiments. The dollar index strengthened along with the US treasury after hawkish comments from Federal officials. The forward markets indicate USDINR could open 30 to 32 paise higher near 81.90 odd levels, which will be the new record high. On Tuesday, spot USDINR oscillated in the narrow range before closing at 81.58. The delay in Indian bond inclusion in the JP Morgan bond index pushed the pair and bond yield higher in the second half of the trading session.”

“Technically, the pair is still bullish and one can expect 82 and 82.90 if the dollar index continues to bid well while on the downside it has support at 81. The onshore yuan fell to the weakest level against the dollar since the global financial crisis in 2008, amid an incessant advance in the greenback and speculation China is toning down its support for the local currency. The currency is under pressure as the nation’s monetary policy with the US diverges further as the Federal Reserve hikes rates.”

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

“USDINR spot closed at 81.58, down 4 paise on a day of slight choppy trading. Rally in global equities and softness in the US Dollar Index pushed the pair lower. However, higher US yields and demand from importers kept the pair well supported near 81.30 levels Over the near term, we expect USDINR to trade within a broad range of 81.00 and 81.80 levels on spot.”

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

“Rupee consolidated in a narrow range but broadly was weighed down after some sources suggest that India’s long wait to win inclusion in JPMorgan’s influential emerging market debt index could be pushed out into next year due to a number of issues that needs to address. News of the likely delay in the inclusion process saw the Indian rupee turn lower, while yields on the government’s benchmark bonds rose to 7.37% from the day’s low of 7.27%.”

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“The BoE said that it would not hesitate to change interest rates and was monitoring markets “very closely” after the pound plunged. Dollar strengthened after data released from the US showed new home sales number rose in August as compared from the previous month. Today, volatility could remain low as no major economic data is expected t be released from the US. We expect the USDINR(Spot) to trade sideways and quote in the range of 81.20 and 81.80.”

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