Rupee likely to depreciate on strong dollar, risk aversion in markets; USDINR may trade in this range

The Indian rupee is likely to open weaker on Tuesday amid strong dollar, weak market sentiments as the US Federal Reserve rate outlook dampened demand for risky assets. The domestic currency may trade lower in early deals, down from 82.32 in the previous session. USDINR spot price is expected to trade in the range of 81.50 and 83 in the next couple of days. In the previous session, the local unit had dropped to a record low of 82.68, but recouped losses to end flat due to likely intervention from the Reserve Bank of India (RBI). According to experts, RBI sold more than a billion dollars on Monday to protect fast depreciation in rupee, allowing some respite to importers.

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“The rupee hit fresh record lows on rising oil prices, if the oil again jumps above $100 per barrel, it will surely ring alarms and further stress the deficits and the rupee. Also, weakness was seen as Fed members continued to sound hawkish with two latest speeches by Fed Chair Jerome Powell signalling that the central bank is likely to raise interest rates in 2023 also. This will boost borrowing costs for banks and corporates, which could weigh on economic growth. The RBI has so far intervened only sporadically in the market, to taper volatility, may see further also, we expect the USD-INR pair to trade higher in a range of 81.80 to 83.50 for this week.”

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

“The Indian rupee has plunged to a record low amid the risk-off sentiments in the market and as the restrictive policy stance of the US Fed looks to continue. The recent jobs data points to a robust US labor market giving further room to the US Fed to aggressively hike interest rates. This is buoying the US dollar and has suppressed the Indian rupee. Besides, higher demand from oil importers amid the revival in crude oil prices on the back of deep supply cuts is leading to worries about a widening current account deficit, estimated to swell to around 3% of the GDP. Markets are now looking forward to the US as well as domestic inflation data for further cues.”

Anuj Choudhary – Research Analyst, Sharekhan by BNP Paribas

“Indian Rupee touched a fresh record low of 82.73 per US Dollar today on strong Greenback post strong monthly job report out of the US Friday. The US Non-farm payrolls added 263,000 jobs in September, thus topping the median estimate of 248,000 jobs, while the unemployment rate fell to 3.5% beating the consensus of 3.7%. Odds of the Fed hiking rates by another 75 bps in its November FOMC meeting have increased to 92%. Asian markets traded in the negative following sharp decline in US markets on Friday and renewed geopolitical tensions between Russia and Ukraine which has led to risk-off sentiments.”

“We expect Rupee to trade with a negative bias amid weak global markets, strong Dollar and downward revision of India’s GDP forecast by World Bank. Dollar index is currently trading at 113.16 from 112.05 at the time of release of jobs data Friday evening. Surge in crude oil prices as OPEC+ has decided to cut down on oil production by 2 mbpd from November to stabilize oil prices may also put downside pressure on Rupee. Fears that Fed may keep on hiking rates aggressively and global economic slowdown may also weigh on Rupee. Investors may remain cautious ahead of US inflation data later this week. We expect USDINR spot price to trade in the range of 81.50 and 83 in next couple of sessions.”

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Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors

“Rupee to open at 82.50 as dollar index rises to 113.10 levels, while oil falls to $96 per barrel on account of slowing demand, particularly from China where lockdown due to covid prevails. RBI sold more than a billion dollars yesterday to protect a fast depreciation in Rupee allowing some respite to importers who could start panicking after a fall of 10.50% In its value this year. The range for the day is expected to be between 82.20 to 82.80 as Asian currencies fall from their recent highs. Markets await US CPI data and Indian CPI data. The US data may fall slightly while Indian data may rise. Exporters may continue holding their dollar receivables till the stop loss of 82 is not breached while importers may continue to buy the dips.”

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