The possibility of weakening of the rupee due to the strengthening of the dollar, risk aversion in the markets; USDINR pair to trade in this range
Indian Rupee There is a possibility of depreciation on Thursday amid strengthening dollar, risk aversion in domestic, global markets. “The rupee is likely to open the day near the sticky levels of 77.60 and another narrow day is expected between 77.45 to 77.80,” experts said. The rupee had recovered from its record low against the US dollar in the previous session. At the interbank forex market, the rupee opened at 77.58 against the greenback and moved in a range of 77.51 to 77.62 in the day’s trade. The local unit closed at 77.51, 20 paise higher than its previous close. “USDINR is spot in a range between 77.40 and 77.80. Buying near the 77.60/70 zone is advisable with a stop below 77.55. Option sellers need to reduce their bet size as the option premium is at rest. Very low,” said Anindya Banerjee, VP, currency derivatives and interest rate derivatives Kotak Securities.
Amit Pabri, MD, CR Forex Advisors
“After a fall of over 3.5% in the last fortnight of May, the US dollar index rebounded sharply by 1.20% in the recent trading days due to a few reasons. First, the US 10-year yield rose from 2.70% to 2.95% amid expectations of higher inflation in the near future due to higher oil prices. Second, the Fed began its quantitative tightening on June 1 at $47.50 billion a month for the first three months. This increased the upward pressure on the real yield. Besides, a strong US ISM Manufacturing PMI and an optimistic beige book supported the rally in the USD. Risk-off sentiment again took charge as equity market halted its recovery move and started correcting. Finally, a strong correction in the DM and EM currencies on the back of risk aversion trade helped safe-haven demand in the USD.
“Sure, it was a warm welcome to the Fed’s quantitative tightening of the US dollar. But when asked- “How’s the josh?” For the Indian rupee, the answer was “Low sir”. Carry traders, hedgers and speculators, Everyone is tired of seeing the same rate in the 77.45-65 zone. At least since the COVID period the volatility has not been so low. And it indicates imminent higher volatility. Today, the Indian Rupee starts around the sticky level of 77.60. And another narrow day is expected between 77.45 to 77.80. The reason behind this is bid side matching by FIIs/oil importers and sell side/sells by exporters.reserve Bank of India, All eyes are now on today’s OPEC-JMMC meetings and US private payroll data. Any sharp move in oil price to $6-8 can definitely say a big move in USDINR pair. Overall, a break below 77.45 will take the pair further down towards the 77.10 and 76.80 levels. Whereas, immediate resistance lies near the 77.80 level and further towards the 78 level.
Tapish Pandey, Senior Research Analyst, SMC Global Securities
“The Indian rupee is likely to trade on a mixed note as Saudi Arabia is set to increase its oil production if Russia’s output declines significantly due to Western sanctions,” Financial Times quoted sources as saying on Wednesday. Dollar- Rupee is consolidating in the near future levels in the range of 77.51 to 78.03 for the past few trading sessions, the same range will act as strong support and resistance respectively for the near future.The current trading setup suggests that the near future Monthly USDINR is likely to remain in the same range for the coming session however any move beyond the above range can set further momentum in the same direction in which the range is broken. The overall trend for USDINR is bullish hence lower Any downside towards the levels can be used as a trading opportunity by placing a stop loss below the 77.25 level.
Gaurang Somaiya, Forex and Bullion Analyst, Motilal Oswal Financial Services
“The rupee continued to trade in a narrow range and volatility remained low despite weakness in domestic and global equities. On the domestic front, the GDP and fiscal deficit numbers did not have much impact on the currency. There was also slight weakness in the rupee as global oil prices strengthened after EU leaders to gradually phase out Russian oil, even as China ended its stringent COVID-19 lockdown in Shanghai. which could increase the demand for crude in an already tight market. Yesterday, the dollar edged up against its key cross despite better-than-expected manufacturing PMI numbers from the US.
“Data shows US manufacturing activity picked up in May as demand for goods remained strong despite a rise in prices. The pound fell against the US dollar after expanding British manufacturing activity in May at the weakest rate since January 2021, as consumer goods producers struggled against worsening cost of living. Money markets still discount the path of an aggressive monetary tightening from the BoE despite concerns of an economic slowdown as they raise the BoE rate by 140 basis points through the end of the year. Today, the focus will be on private payroll numbers from the US and better-than-expected economic data could drive gains for the dollar. We expect USDINR (Spot) to trade sideways and place a bid in the range of 77.05 and 77.80.
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