Rupee likely to depreciate on FII outflows, risk aversion in markets; USINR pair to trade in this range

The Indian Rupee is likely to depreciate on Friday on agency greenback, risk aversion in world markets. Persistent FII outflows may also weigh in on the home unit, in accordance to analysts. USDINR will stay bid above 77 ranges on spot. However, it might require much more greenback weak spot to take USDINR above 78 ranges. Snapping its two-day profitable streak, rupee slumped in opposition to the US greenback in earlier session, following risk-off sentiments amid growing issues over inflation globally. Weak home equities, surging US greenback in abroad markets and chronic overseas fund outflows additionally weighed on the rupee which plunged to its all-time intra-day low of 77.63 earlier than settling at settled at 77.40 in opposition to the buck, down by 15 paise over its earlier shut.

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

“Rupee remained under pressure and fell to fresh all- time lows as broader strength in the dollar continued. On the domestic front, market participants remained cautious ahead of the important inflation number that was released yesterday. Data showed inflation rose 7.79% on an annual basis in the month of April owing to higher edible oil & fuel prices. Food inflation, which is driving the rise in retail inflation, rose by 8.38%, the highest so far in this fiscal. April’s print was higher than 6.95% in the previous month and 4.23% a year ago. The greenback rose to fresh 20-year high levels after inflation data released from the US came in higher.”

“Major crosses remained under pressure after data released from the UK showed the economy unexpectedly shrank in March, marking a weak end to the first quarter of a year when the risk of recession is looming and increasing pressure on the government to offer more support to inflation-hit households. GDP fell 0.1% from February, hurt by a slump in car sales due to supply-chain problems. Today, investors will be keeping an eye on the preliminary consumer sentiment number to gauge a view for the dollar. We expect USDINR(Spot) to trade sideways with a positive bias and quote in the range of 77.20 and 77.80.”

Praveen Singh- AVP, Fundamental currencies and Commodities Ananlyst, Sharekhan by BNP Paribhas

“Indian Rupee traded on a weak note yesterday and touched a record-low of 77.6350 on a sharp fall in domestic equity markets and a stronger Dollar. Concerns over global economic recovery and sustained FII selling also put downside pressure on the Rupee. FIIs remained net sellers for the eighth consecutive session as on Wednesday, and sold about Rs 3,609 crore. However, reports of RBI intervention in the forex markets to defend the Rupee prevented sharp downside in Rupee. Decline in global crude oil prices and softening US yields also cushioned the downside to some extent. Rupee is expected to remain weak on risk aversion in global markets and FII outflows from the domestic markets. Concerns over global economic recovery and worries about lockdown in China may weigh on Rupee. Chinas continues with the lockdowns and confinements despite easing Covid cases. Geopolitical tensions due to the Russia-Ukraine war may also put downside pressure on Rupee. However, weak crude oil prices and intervention by the RBI may support Rupee at lower levels. Rupee may trade in the range of 76.80-78.20 in next couple of sessions.”

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

“USDINR had a choppy day in spite of a stellar run in the US Dollar against key currencies globally and equity markets taking it on the chin. There are no prizes for calling out who is the owner of the invisible force that kept Rupee so disciplined. Indian macro data is net negative with CPI inflation spiking to an eight-year high at 7.8% and IIP rising barely 1.9%, though on a very high base. However, offshore markets are not bidding on the Rupee, which could be due to suspected RBI intervention over there as well. However, as long US Dollar remains strong, USDINR will remain bid above 77 levels on spot. However, it would require even more dollar weakness to take USDINR above 78 levels. Bias continues to be upward.”

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