Rupee Likely to Slide Further on Strong Dollar, FII Outflows; USDINR is trading sideways with a positive bias

Extending losses for the third consecutive session, the Indian rupee fell 33 paise on Tuesday to close at 74.58 against the US dollar, as US greenback strength and high crude oil prices continued to weigh on investor sentiment. . In the interbank FX market, the local unit opened at 74.36 against the US dollar and saw an intraday low of 74.60 before settling at 74.58, down 33 paise from to its previous close of 74.25 against the greenback. Meanwhile, the dollar index, which measures the strength of the greenback against a basket of six currencies, was trading down 0.09% at 95.34. Rupee weakness is likely to continue for some time to come, and it is possible for the Indian currency to break through the 75.00 levels in the coming days, analysts say.

Heena Naik, Research Analyst – Currency, Angel One Ltd

“For the past few days, the Indian Rupee has been trading positively. However, this trend was eventually thwarted, dragging the Rupee into negative territory. Today, the local unit weakened by nearly 0.45% touching the lower levels of 74.60.The reason behind this could be attributed to the opportunistic buying of dollars by importing companies and banks.

“Additionally, many foreign investors are turning to dollar-denominated assets for investing as the FOMC policy meeting is fast approaching (27 Jan 22), which could be hawkish in nature. This is hampering most emerging markets , including India, which is in turn experiencing capital outflows affecting the Indian currency. This weakness is likely to continue for some time to come. There is a possibility that the Rupee (CMP – 74.57) will break through the levels of 75.00 in the next few days A breakout of the same could push the currency towards 75.20 and higher levels.

Dilip Parmar, Research Analyst, HDFC Securities

“Rising crude oil prices and risk sentiments following a surge in bond yields are enough for the rupiah to become the worst performing currency among Asian currencies. from oil importers after Brent crude oil prices started to quote above $87 a barrel due to supply concerns Going forward, the USDINR rebound may continue for a few days more as sentiment turns favorable USDINR spot broke and held above the short term hurdle at 74.50, the 100 day simple average, now opened the way to the 75 level while support was moved to 74.25.

The rupee will continue to depreciate: ICICI Direct

“The Rupee futures contract maturing on January 27 depreciated by 0.46% amid a strong dollar and risk aversion in domestic markets. In addition, the rupee slipped on the outflows persistent FII and seven-year high crude oil prices The rupiah is expected to continue its depreciation on pessimistic global market sentiment and dollar strength The dollar is regaining strength as market participants prepare for a more aggressive monetary tightening from the US Fed to fight relentless inflation.Additionally, the Rupee may slide on high crude oil prices and constant FII outflows.

Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.

“The Rupee continued to remain under pressure following losses in domestic equities and the strength of the Dollar against its major crosses. The greenback’s gains extended after US Treasury yields hit a two-year high on expectations that the Federal Reserve may raise rates sooner than expected. Yesterday, US Treasury yields hit two-year highs and stock markets fell more than 2%. Inflation fears were heightened as oil prices rose to their highest level since 2014 due to possible supply disruptions after the attacks in the Gulf boosted an already tight outlook.

“Yields have jumped since the Fed’s December meeting minutes showed it could raise rates sooner than expected and start trimming assets to slow inflation and deal with a tight labor market. The euro and the pound were both weighed down in yesterday’s sessions following broad gains in the dollar.At the same time, inflation in the eurozone and the UK is expected to remain higher throughout of the year 2022, which could put pressure on the European Central Bank to tighten its policy once the Omicron wave of the pandemic has passed.Today the focus will be on the inflation figure which will be released by the UK which may trigger additional volatility for the currency. We expect the USDINR pair to trade with a positive bias and quote in the range of 74.20 and 74.80.”

USDINR has a chance to hit level 75: Kotak Securities

“The double negative or double headwind for the rupiah remains in place through oil prices which have jumped to 7 years and US bond yields which are at a 2-year high. On the one hand, oil high creates the risk of higher inflation and is a tax on consumers, and on the other hand, rising real yields of US yields increase the attractiveness of USD assets relative to emerging market assets. USDINR has a chance to rally towards the 75.00/75.30 levels in the near term if this cocktail of headwinds can persist Technically the trend is up and momentum is strong Buying on the downside is advised with a stop below 74.30 on a daily closing basis.