Rupee likely to depreciate on strong dollar, risk aversion in markets; USDINR pair to trade with positive bias

The Indian rupee is expected to open flat and trade with negative bias amid elevated crude prices, risk aversion in equity markets. Support is at Rs 81.50, while resistance comes at 83, according to forex analysts. In the previous session, rupee fell 14 paise to close at 82.35 (provisional) against the US dollar amid the strengthening of the American currency and sustained foreign fund outflows. Besides, risk aversion sentiment among investors weighed on the local unit. According to a Reuters report, RBI, seeking to arrest the rupee’s slide, is asking local banks to not build additional positions in the non-deliverable forward market, a move that could lead to offshore volatility spilling into local markets.

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“Rupee consolidated in a narrow range ahead of the inflation number that was released yesterday. Data showed inflation accelerated in September to a five-month high of 7.41% year-on-year as food prices surged, raising fears of further interest-rate hikes when the central bank meets for its next policy review in December.Food inflation, which accounts for nearly 40% of the CPI basket, rose 8.60% in September, compared to 7.62% in August.”

“Dollar paired some of the gains after FOMC meeting minutes showed several participants noted the importance of calibrating the pace of further tightening to mitigate the risk on the U.S. economy. At the meeting, many officials said they had raised their assessments of the path of interest rate increases that would likely be needed to achieve the committee’s goals. Today, focus will be on the inflation number that will be released from the US. Higher number could keep the dollar supported at lower level. We expect the USDINR(Spot) to trade with a positive bias and quote in the range of 82.10 and 82.80.”

Dilip Parmar, Research Analyst, HDFC Securities

The Indian Rupee could start on a flat note following lackluster trading in the greenback ahead of US CPI data later today. The lower crude oil prices and the central bank’s intervention is supporting the rupee so far this week even after foreign fund outflows and weak risk sentiments. On Humpday, spot USDINR fell 2 paise to 82.31, it was the third day in a row it closes near this level. The pair has been in consolidating ahead of crucial US inflation data. Level to Look in Spot USDINR: Resistance: 82.6950, YTD high; 83.1880, upper Bollinger Band; Support: 81.2438, Sept 23 high; 80.0137, Sept. 21 gap high.

Praveen Singh, AVP- Fundamental currencies and Commodities analyst, Sharekhan by BNP Paribas

“The domestic currency is trading with a loss of 0.10% in spot market as the traders awaited India’s inflation and industrial production data to be released. Traders will also look at US PPI data (September), and parse FOMC minutes of 20-21 September meeting for clues to the Fed’s stance on rate hike path. US CPI data will be of prime importance for the financial markets, though barring a big miss the US Dollar is expected to be well bid.”

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“Bank of England’s signals regarding extension of its long dated bond buying program ending on 14th October are mixed. Last night Pound fell sharply leading to risk aversion in the financial markets as the Bank of England cited high volatility surpassing Bank’s stress test result. Vulnerable Pound is a risk to the markets. The Indian Rupee is expected to consolidate ahead of the US CPI data. Support is at Rs 81.50, while resistance comes at 83. Market is sensing that 83 is a stiff resistance for the US dollar. RBI is probably intervening to defend this level.”

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