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

The Indian rupee is likely to fall on the strength of the dollar and risk aversion in the markets as investors remain cautious ahead of the September 20-21 Federal Reserve meeting. According to forex analysts, the USDINR spot price is expected to trade in a range of Rs.79-80.50 in the next few sessions. In the previous session, the rupee marked its worst week in five as risk sentiment was hit by the Chinese yuan, which slipped above 7 per dollar, breaking a key psychological level for the first time in two years. The local unit was down 0.1% at 79.74 per dollar, recouping some of the daily losses as it hit a weekly low. On the week, the rupee declined 0.2%, its biggest loss since the week ended August 12.

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Anuj Choudhary – Research Analyst, Sharekhan at BNP Paribas

“Amid weak domestic markets and a strong US dollar, the Indian rupee fell 0.03% on Friday. Domestic markets declined ~1.6%. The US dollar is trading 0.3% higher at 110.01 on anticipation of a more hawkish Federal Reserve. We expect the rupee to trade with a negative bias given the strong dollar and risk aversion in global markets. Global markets declined after IMF spokesman Gerry Rice raised concerns about a further slowdown in the global economy and said some countries are likely to slide into recession in 2023.”

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“Concerns over aggressive Federal Reserve rate hike expectations could also put downward pressure on the rupee. However, falling crude oil prices could support the rupee at lower levels. Markets can also be guided by FII fund flow data. Trades may also be guided by US consumer sentiment, which is expected better than previous readings. USDINR spot price is expected to trade in a range of Rs 79 to Rs 80.50 over the next few sessions.”

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

“The USDINR spot closed 4 paise higher at 79.74 in a day of quiet trading. The rise in the dollar index, firm US bond yields and weakness in equities contributed to demand for the US dollar, but selling by exporters and suspected central bank intervention limited progress. In the next week, USDINR could slide into a tight range ahead of the US FOMC. We expect a range of 79.40 to 80.00 on the ground.”

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Yes securities research

“The US dollar index rallied while Treasury yields rose after data showed US consumer prices rose faster than expected in August, prompting bets on more aggressive Federal Reserve rate hikes. During the week drop found support near 79.20, after which a quick recovery ensued, ensuring immediate support near 79.40. USDINR September Future is likely to fluctuate between the 79.40 – 80.30 zone.”

Gaurang Somaiya, FX & Precious Metals Analyst, Motilal Oswal Financial Services

“The rupee has consolidated in a tight range over the past few sessions and volatility has remained low even after US and UK inflation numbers came in above estimates. The dollar fell marginally against its major crosses on Friday, even after the University of Michigan’s September preliminary read on the composite consumer sentiment index came in at 59.5, up from 58.6 the previous month. Broadly speaking, the dollar could continue to find support ahead of the FOMC policy statement. Most market participants expect a high chance of a 75 basis point rate hike at this week’s session, with some even expecting a 100 basis point hike.”

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“The rupee was slightly weighed down after the offshore yuan broke above the critical 7-per-dollar threshold overnight for the first time in more than two years. On the other hand, the pound remained under pressure after retail sales fell much more-than-expected in August, another sign the economy is slipping into recession as the cost of living squeezes households’ disposable spending. Volatility may remain low today as no major economic data is expected from the US. We expect USDINR(Spot) to trade sideways, trading in the 79.40-80.05 range.”

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