Rupee to remain volatile ahead of RBI monetary policy decision, USDINR pair to trade sideways in this range

The Indian Rupee is likely to remain flat on Friday as volatility for the domestic currency will remain high following increasing tensions between China and Taiwan. Moreover, traders will also remain cautious ahead of the RBI’s monetary policy decision. USDINR pair is expected to trade within a broad range of 78.80 and 79.80. In the previous session, rupee depreciated 17 paise against the US dollar, weighed down by disappointing macroeconomic data and US-China tensions. At the interbank foreign exchange market, the local currency opened at 79.21 and finally settled at 79.32, down 17 paise over its previous close. The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.27 per cent to 106.22.

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

“It was a volatile day in USDINR, as the pair did yo-yo on corporate $ outflows and heavy RBI intervention. Spot closed at 79.47, up 31 paise. We could see volatility peak tomorrow, as RBI announces its monetary policy. We expect USDINR to trade within a broad range of 78.80 and 79.80 on spot.”

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

“Rupee had quite a volatile day as it fell in the first half of the session but rose in the latter half following suspected RBI intervention. Volatility also has been high ahead of the important RBI policy statement that will be released today. Expectation is that the central bank could raise rates by 35bps and maintain hawkish stance. Outlook on inflation and growth going forward is likely to provide cues to the currency.The rupee’s weekly volatility jumped to its highest in nearly five months as a lack of guidance on rate increase by the RBI kept traders guessing.”

“Pound also witnessed volatility ahead of the Bank of England policy statement wherein the central bank raised rates by 50bps. The big hike had been expected as central banks around the world scramble to contain soaring prices. Pound fell after the BoE said Britain would enter a recession at the end of 2022 and not emerge until early 2024.The monthly U.S. non-farm payrolls report will be closely watched today for clues on whether the tight labor market will continue to push up wages. We expect the USDINR(Spot) to trade sideways and quote in the range of 78.70 and 79.40.”

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Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors

“Indian rupee to open around 79.17 as oil falls to $ 94 per barrel after a volatile session yesterday in which the rupee moved from 79.23 to 79.80 and then closed at 79.47. If oil fall then our trade deficit could be lower and the rupee may gain. The RBI is set to raise rates by about 50 bps in today’s monetary policy meeting as the dollar languishes near 106 levels. The prospects of a recession in the UK towards the year-end brought GBP down despite a 50 bps rate hike after 27 years. RBI was selling dollars heavily as the rupee reached 79.80 levels. Exporters may sell at all upticks while importers can buy $ at near to 79.00 levels to hedge imports.”