Rupee likely to depreciate amid strong dollar, elevated crude prices; USDINR pair to trade in this range

The Indian Rupee is likely to remain under pressure amid risk aversion in equity markets, rising crude prices and strength in US dollar. The USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 80.50 in next couple of sessions, according to analysts. Today, focus will be on the preliminary manufacturing PMI number that will be released from the US, EZ and the UK. In the previous session, rupee slumped to hit a 4-week intra-day low of 79.92. The local unit fell 4 paise to close provisionally at 79.87 against the US dollar. Weak domestic equities dragged on the rupee, as investors locked-in gains after a recent rally.

Dilip Parmar, Research Analyst, HDFC Securities

“The Indian Rupee could start the day on the backfoot following overnight strength in the dollar index, higher crude oil prices and risk-averse sentiments. Asian currencies are mixed against the dollar in the Asian morning sessions but could weaken amid risk-off sentiment spurred by losses in regional equity markets. Indian 10-year yields rose 1bp to 7.27% after climbing to as high as 7.31% intraday. On Monday, spot USDINR gained 9 paise to 79.87, gaining the fourth day in trot. Technically, the pair is in an uptrend and crossing the psychological level of 80 will push it towards the 80.50 to 80.70 range while near-term support would be in the range of 79.40 to 79.25.”

Anuj Choudhary, Research Analyst, Sharekhan by BNP Paribas

“Indian rupee remained flat on Monday. Rupee opened with minor gains on weak crude oil prices and inflows by FIIs. However, the gains were shortlived and Rupee weakened on strong Dollar and risk aversion in domestic markets. Domestic equity markets are lower by approximately 1.25%. US Dollar gained on safe haven demand amid risk aversion in global markets and concerns over global economic slowdown and positive economic data from US. US Philly Fed Manufacturing Index gained to 6.2 in August from -12.3 in July. US weekly unemployment claims fell to 250,000 for the week ended August 12 compared to 252,000 in the previous week.”

“Fed officials James Bullard and Mary Daly were of the view that interest rates should be hiked further to control inflation. However, weak new home sales data capped sharp gains. We expect Rupee to trade on deteriorating global risk sentiments and strong US Dollar. Worries over slowdown in global economic may also put downside pressure on Rupee. However, weak crude oil prices and FII inflows may support Rupee at lower levels. Market participants may also remain cautious ahead of Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium later this week on cues over September monetary policy. USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 80.50 in next couple of sessions.”

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

“The Indian rupee has slumped towards a three-week low, amid a recovery in crude oil prices and the resurgent dollar index which has climbed by more than 3.5% since testing lows of the 104.63 mark, two weeks ago. Hawkish comments from various Fed policymakers stressing the need for further super-sized rate hikes to combat elevated price pressures and upbeat economic data from the US have supported the greenback’s recent upswing. The steep correction witnessed in the domestic equities has further added to the rupee woes.”

Also Read: Share Market LIVE: SGX Nifty hints at lacklustre opening for Sensex, Nifty; Infosys trims variable payout

“Going forward, the domestic currency is likely to trade in a range between 80.10 and 79.20, where the 80.10 mark is a crucial support for the pair. Any breach of the crucial 80.10 mark would further accentuate the fall in the rupee-dollar exchange rate. All eyes would now be on the Jackson Hole Symposium next week where the Fed Chair is expected to provide further guidance about how high the US borrowing costs could go in the coming months and steer the path for the rupee-dollar exchange rate.”