The Indian rupee is expected to depreciate on Thursday amid strong dollar and risk aversion in global markets. Market sentiments are hurt as red hot inflation in the US stoked bets that the US Fed may have to raise interest rates much more than expected, even 100 bps. Additionally, consistent FII outflows and concerns on looming recession may hurt rupee. US$INR (July) is expected to trade in a range of 79.50-80.00, said ICICIDirect. In the previous session, rupee declined by 22 paise to close at a record low of 79.81 against the US dollar after the greenback surged to a 20-year high in overseas markets and foreign investors continued to withdraw funds from Indian stocks.
Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas
“Indian rupee touched a record low of 79.6875 yesterday on strong US Dollar and weak tone in domestic markets. FII outflows also weighed on Rupee. FII outflows on Tuesday stood at Rs. 1,565 crores. However, weak crude oil prices prevented a sharp fall in Rupee. India’s CPI in June cooled down slightly to 7.01% from 7.04% in May. Rupee is expected to trade remain weak on a strong Dollar and deteriorating global sentiments.”
“Dollar is expected to strengthen further as today’s US consumer inflation data is expected to rise to a cyclical high 8.8% in June from 8.6% in the previous month. If inflation continues to surge, it raises odds that US Federal Reserve may hike rates aggressively by 75 bps in its July policy. However, softness in crude oil may support rupee at lower levels. Rupee may trade in the range of 78.80-80.20 in next couple of sessions.”
Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services
“Rupee continued to remain under pressure and fell to its record lows following broader strength in the dollar against its major crosses. Market participants remained cautious ahead of the important CPI number from the US. Data showed Year-on-year consumer price growth accelerated to a scorching 9.1%, the hottest reading since November 1981, driven by an 11.2% monthly spike in gasoline prices. On the other hand, core CPI cooled down to an annual rate of 5.9%. The report raised odds that the Federal Reserve will raise interest rates even more than the 75 basis points previously expected.”
“The Fed funds target rate have also now priced in the probability of a larger, 100 basis point, hike at the conclusion of its policy meeting later this month. Yields on longer-term Treasuries fell, making the so-called yield-curve inversion the most pronounced it has been in more than 20 years. Today, focus will be on the PPI number from the US to gauge a view for the dollar that has risen to the highest level in 20 years. We expect the USDINR(Spot) to trade with a positive bias and quote in the range of 79.40 and 80.00.”
Amit Pabari, MD, CR Forex Advisors
“Domestic financial markets are struggling to cope with record FII outflows and widening deficits, the RBI has been on the front foot by announcing a series of measures to bring back foreign capital and curb the USDINR volatility. Well, the onshore intraday volatility still seems to remain subdued amid RBI intervention who is trying to cap the losses in the rupee, however the same hasn’t been fruitful as the USDINR pair opens at a higher level than the previous day as witnessed in the past few trading sessions. The rupee is likely to set its new low today by opening around 79.75 levels and the range for the day could be between 79.50 to 80.00 levels. If the big figure 80 levels are broken, move towards 81 will be sharp and soon.
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