Rupee likely to remain steady amid strong dollar, risk aversion in markets; USDINR pair to trade sideways

The Indian rupee is expected to remain sideways on Friday amid falling crude prices, risk aversion in global equity markets and strong dollar. The USDINR pairpair is having resistance at 79.90 and 80.15, while the support has been shifted to 79.40 from 79.05, according to analysts. In the previous session, rupee declined due to strong demand for the U.S. dollar from oil companies, while markets braced for a big rate hike from the U.S. Federal Reserve next week. Firm American currency and a negative trend in domestic equities wieghed on the currency. At the interbank foreign exchange market, the local unit opened at 79.53 per dollar, and settled at 79.73, down 21 paise over its previous close.

Also Read: Petrol, Diesel Price Today, 16 Sep 2022: Fuel cost static; check rates in Delhi, Noida, Mumbai, other cities

“Rupee on Thursday consolidated in a narrow a range and volatility remained low even after inflation number from the US and the UK came above estimates. The dollar was slightly higher following data showing U.S. retail sales unexpectedly rebounded in August. But gains for the dollar was restricted as data for July was revised downward to show retail sales declining instead of flat as previously reported. The greenback has been supported by the view that the Fed will keep tightening policy aggressively.”

“Yen was under pressure after a record Japanese trade deficit for August. The yen’s fall by nearly 20% over the past six months added to higher import costs, aggravating already high costs of energy and raw materials. The market remains choppy knowing that there’s a Fed meeting next week. Even though market participants agree that there could be a 75 basis points rate hike, it’s what the statement adds to previous commentary and what Chairman Powell says in his press conference. We expect the USDINR(Spot) to trade sideways and quote in the range of 79.40 and 80.05.”

Dilip Parmar, Research Analyst, HDFC Securities

“The Indian Rupee could fall lower following a weak handover from overseas. Overnight, we have seen risk-averse moods after mix bag of US economic data that backed the view of hawkish monetary policy. US Swaps traders are currently pricing in a 75 basis-point hike when the Fed meets next week. The weakness in the Chinese yuan which crosses the 7 could also weigh on other regional currencies.”

“Asian stocks headed for the fifth week of declines following more weakness in US equities and a surge in short-end Treasury yields that reflects expectations for outsized Federal Reserve interest rate hikes. On Thursday, spot USDINR gained 26 paise to 0.33% to 79.79 and heads for the first weekly gain after two weeks of fall. The technical set-up turned bullish after the past two days of price action. The pair is having resistance at 79.90 and 80.15 while the support has been shifted to 79.40 from 79.05.”

Also Read: Share Market LIVE: Nifty, Sensex likely to open in red amid weak global cues; last day of Harsha Engineers IPO

Amit Pabari, MD, CR Forex Advisors

“Inflation in US and its strong consumer and labor markets are backing the Fed’s aggressive rate hike decision in the upcoming policy meet on 21st September. Markets have priced in fully the chance of an increase of 0.75 bps while the 30% see an increase of 1 full percentage rate hike as of today, all of which is supporting the strength in US dollar and shot US 10Y yields to a 52-week high yesterday. Here, the recent sharp appreciation in rupee near 79.00 levels has been quickly washed off for it to trade again back to near 79.80 levels.”

“It could be the influence of the strong dollar, weaker sentiments or weakening of the Chinese Yuan past 7.00 all negative factors weighing on rupee. The next move towards 79.95 and 80.10 is basically the RBI’s play as one needs to be cautious from the central bank intervention from the past two times. For now, the level of 80.10 remains a strong resistance for the USDINR pair, which haven’t been able to breach multiple times in the past though however posed the rest of the currencies are. Breaking of 80.10 could invite another upside move of 50 paisa to 1 rupee. On the flip side, 79.00 remains a strong support for the pair.”

(The recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com 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.)