Rupee likely to depreciate further on persistent FII outflows, USDINR pair to trade in this range

The Indian rupee is likely to depreciate further on Thursaday amid continuous FII outflows. By the time a new trigger comes, the USDINR pair is expected to consolidate in the range of 77.70 to 78.30, according to forex analysts. In the previous session, the rupee plunged to close at a fresh all-time low against the US dollar as a lacklustre trend in domestic equities and persistent foreign fund outflows weighed on investor sentiments. At the interbank foreign exchange market, the local unit opened at 77.99 and finally settled at its all-time low of 78.17, down 13 paise over its previous close of 78.04 against the greenback.

Dilip Parmar, Research Analyst, HDFC Securities.

“Indian rupee may gain in line with emerging Asian peers as Fed Chair Powell said super-sized interest-rate hikes will be rare after a 75bps hike on Wednesday. History repeated with the dollar gauge halted a five-day winning streak after policy decisions as buying the rumours and selling the facts done. Powell might have convinced markets the Fed will manage to get inflation under control with a couple of outsized rate hikes in the coming months and buy itself some flexibility to slow down soon. Spot USDINR is facing stiff resistance around 78.30 while on the downside also it has limited space up to 77.70. By the time a new trigger comes, the pair is expected to consolidate in the range of 77.70 to 78.30 with bias remaining on the bullish side.”

Rupee expected to depreciate further: ICICI Direct

“The dollar slipped by 0.60% on Wednesday after the Federal Reserve raised interest rates by 75 basis points in a historic move to fight inflation and projected a slowing economy and rising unemployment in the months to come. Further, dollar was pressurized by weak retail sales data. Retail sales in the US unexpectedly fell 0.3% MoM in May, the first decline so far this year and compared to market forecasts of a 0.2% rise. It follows a downwardly revised 0.7% increase in April, as high inflation, gasoline prices and borrowing costs hurt spending on non-essential goods. Moreover, pull back in US treasury bond yields weighted dollar. The rupee is expected to depreciate today amid persistent foreign funds outflows. Further, investors will remain vigilant ahead of Initial Jobless Claims and Fed manufacturing Index data. USDINR is expected to trade in the range of 78.15 to 78.40.”

Amit Pabari, MD, CR Forex Advisors

“The US Fed surprised markets with the largest 75 basis point rate hike in 28 years before hinting at one as it usually does. Retail sales dropped 0.3% for the first time in a year, with core spending growth slowing to 0.1% and a significant drop in the personal savings rate to cope with inflation. The rupee’s reaction to all this remains quite subtle and the pair seems quite comfortably in a tight range above 78.00 levels. Taking the opportunity of optimism which could be short-lived, if RBI brings the rupee below 77.80 levels, then the pair might again struggle to notch above 78 mark. Therefore, one or two trading sessions shall be keenly watched to draw the path for USDINR in the near term, as the market dynamics are overnight changing and reactions are getting opposite.

(The recommendations in this story are by the respective research analysts and brokerage firms. does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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