Rupee may remain steady amid declining crude prices, rise in risk in equity markets; USDINR to trade sideways

The Indian rupee is expected to remain steady on Friday amid rising risk tolerance in equity markets, declining crude oil prices, and retreat in the US dollar. In the previous session, rupee traded in a narrow range and settled 5 paise lower at 82.38 against the American dollar, tracking a muted trend in domestic equities amid weak domestic macroeconomic data. Besides, risk aversion sentiment among investors weighed on the local unit. Spot USDINR has been trading in the narrow range this week amid the central bank intervention on both sides. In the near-term, spot USDINR is having resistance at 82.85 and support at 82.10, according to analysts.

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“Rupee in yesterday’s session traded in a narrow range against the dollar as investors were awaiting inflation data from the U.S. CPI reading for September landed at 8.2%, marking a slight easing in the annual rate of inflation from 8.3% in August, but above estimates of 8.1%. The dollar index rose immediately after the CPI report, but later reversed its gains to trade down 0.7% against its major crosses. Whereas the Core CPI rose 6.6% on an annual basis last month, faster than the 6.3% rate in August — and its fastest pace in four decades.”

“Inflationary concerns still exist in the market and hence market participants continue to factor in 75bps rate hike expectations, there is no major change in the interest rate probability chart. ECB officials mentioned that they see the need for fewer rate hikes than markets now estimate to tame inflation, suggesting that the situation in the euro zone may not be as dire as many thought. Market participants also are on a lookout for Japanese intervention to counter excessive currency moves. Today, focus will be on the India WPI inflation and U.S. Retail sales data. We expect the USDINR(Spot) to trade with sideways bias and quote in the range of 82.20 and 82.85.”

Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors

“Rupee to open at 82.22 after a volatile session in the US when Dow Jones first fell by 500 points but later rose by 823 points. The US CPI came hot at 8.2% but the core inflation came at a 4-decade high thus triggering the volatility. Brent Oil prices fell initially after US inventories rose but then rose to $ 94.66 per barrel. A risk on sentiments triggered by oversold stocks and oversold currencies against the dollar and a fall in US 10 year from 4.10% to 3.91% continued in Asian markets today.”

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“The dollar index also fell from a high of 114 in NYK session to 112.25 levels this morning. Rupee to remain in a range of 82.00 to 82.50 for the day after a volatile NYK session saw it fall to 82.85 levels before recovering back to current levels. Exporters to hold on to their positions of long dollars with a stop at 82.00 while importers to continue buying dips.”

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

“It has been four trading days that USDINR spot has closed around the level of 82.34. Central bank intervention and some corporate flows helped to keep a lid. US CPI report has come in hotter than expected. U.S. consumer prices increased more than expected in September as rents surged by the most since 1990 and the cost of food also rose. Not just headline beat estimates, even the core inflation surged by 0.6% m/m, same rate as August. As a result, US 10-year yields crossed 4% mark and US Dollar strengthened against most currencies.”

“USDINR spot reference in the offshore market is quoting 82.38, after making a high of 82.81. It seems market was well positioned for a stronger CPI and hence there is profit taking after the initial surge in the US Dollar. Positioning plays an important role, as to how long the market can stretch on a hawkish data from US. Today, USDINR is expected to trade with a positive bias. Therefore, intra-day dips can be bought. Support is going to be between 82.25/35 zone on Oct futures.”

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