The rupiah is expected to appreciate amid a surge in risky assets and FII inflows; USDINR pair to trade within this range

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The Indian rupee is expected to appreciate against the US dollar on Tuesday amid a surge in risky assets and an inflow of foreign funds. However, gains could be capped by the strength of the U.S. currency, high crude oil prices, inflation fears and a widening trade deficit, analysts said. USDINR (Spot) is expected to trade with a positive bias and trade in a range of 79.40 and 80.20. In the previous session, the Rupee closed at 79.92 against the US Dollar after breaking through the 80 mark and touching an all-time low at the start of the trade. The local had opened at 80 against the dollar, then fell to 80.06. It however recovered 6 paise on strong regional currencies and a positive domestic stock market.

“Despite the recent depreciation of the Rupee against the Dollar, the Indian currency has been one of the most stable as even hard currencies such as the Euro, Yen and British Pound have depreciated far more than the Rupee. against the dollar over the past 12 months.There are some balance of payments issues for India, including high oil imports, an increasing trade deficit, outflows of foreign portfolio investment and a reduction of nearly of $60 billion in foreign exchange reserves from the peak, the depreciation of the rupees should be viewed more as dollar strength rather than rupee weakness. high currency volatility, as evidenced by many other peers,” said Sujan Hajra, Chief Economist and Managing Director, Anand Rathi Shares & Stock Brokers.

Dilip Parmar, Research Analyst, HDFC Securities

The Indian rupee is expected to open slightly higher amid a surge in risky assets and inflows of foreign funds. On Tuesday, spot USDINR fell 3 paise to 79.95 after touching 80.06 in morning trading. Alleged RBI intervention, weaker Dollar Index and strong risk moods pushed the Dollar lower against the Rupee. However, the upward trend in short-term profit bookings cannot be ruled out amid broad-based greenback weakness. Technically, the USDINR spot has resistance at 80.30 and support at 79.70.

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

“The Rupee consolidated in a tight range during yesterday’s session and volatility was consistent as market participants remained cautious ahead of next week’s FOMC meeting. crossovers after reports suggested European Central Bank policymakers plan to raise interest rates 50 basis points higher than expected at their meeting tomorrow to rein in record inflation. rising borrowing costs, policymakers are also expected to announce a deal to help indebted countries like Italy in the bond market.

“Investors were also monitoring the political drama in Rome, with the Italian government mired in uncertainty over whether Mario Draghi would continue as prime minister. The pound also rose after Britain’s unemployment rate held steady at 3.8% in the three months to May, while the number of people in work has increased the most since the middle of 2021. Today the focus will be on the inflation figure which will be published by UK We expect the USDINR (Spot) to trade with a positive bias and quote in the range of 79.40 and 80.20.

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

“The rupiah depreciated to record lows amid tighter monetary conditions and risk aversion sentiment, as well as continued outflows from domestic markets. High crude oil prices along with concerns over a swelling trade deficit were also the main catalysts for the sharp drop seen in the Indian currency, where it broke above the 80 mark. We see a bit more pain for the currency in the short term, but it is likely to remain dampened by the 81 mark amid a host of factors.

On the one hand, the strength of the dollar index looks unsustainable at higher levels, with expectations that the European Central Bank and other central banks in developed markets will also raise interest rates aggressively. Long-term inflation expectations have fallen in the United States and fears of excessive tightening by the US Fed at the next meeting have subsided, leading to a decline in the dollar index by report to multi-year highs and helps local unity . Additionally, the US central bank may be forced to suspend its rate hike cycle going forward given concerns over recession risks and it looks like the worst is soon over. Second, the RBI and the government have recently taken several measures that could stem the fall of the rupee. The rupee-dollar exchange rate is expected to hover between 78.50 and 81 through September.

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