Fears of a recession could lead to a devaluation of the rupee amid rising crude oil prices; USDINR

The Indian rupee may depreciate on Wednesday amid rising crude prices, fears of inflation and recession, and continued FII outflows. The rupee hit a new low against the dollar on Tuesday as global crude oil prices rose, raising concerns among investors about India’s current account deficit. The rupee’s fall was also expected to be offset by dollar outflows due to the sale of Holcim Group’s India cement business. According to analysts, the Reserve Bank of India may have intervened in the spot, forward and futures markets, helping the local unit to clear the initial losses against the greenback. It sells an estimated 1 billion a day, they said. The local unit hit an all-time low of 77.80 per dollar intraday before closing at 77.57 in the previous session, up 0.26% from the previous close.

Praveen Singh, AVP-Basic Currency and Commodity Analyst

“The Indian rupee depreciated yesterday due to rising crude oil prices and disappointing macroeconomic data. India’s trade deficit widened to. 20.11 billion in April from 18 18.51 billion in March. However, the softening tone of the US dollar and the risky attitude of the world market have offset this fall. The dollar weakened on the positive undertone of risky assets and weak economic data. The rupee is expected to trade with some positive bias in the wake of Shanghai and a growing global risk of weak dollar reopening. However; Overall volatile perceptions of risk and concerns about global economic recovery could be sharply upward. Tensions over the Ukraine war could also weigh on the rupee. The rupee may trade in the 76.80-78.30 range in the next few sessions. “

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

“USDINR spot has a new high at 77.78 but has a high of 77.56. A new high from RBI and USDINR and then suspicious intervention is going down to unchanged levels. This pattern has occurred in the last few trading sessions. Today some of the faults on both sides can be attributed to the rising corporate flow and then pullback but we suspect RBI has also played a key role. Crude oil prices have started to rise as the market in China has slowly started to reopen. The effect of higher oil prices is felt at intervals as long as the US dollar remains soft and equities are higher. Today, the US dollar index was soft for long liquidation and equities were on the bid. But we have to keep an eye on oil prices. Higher oil prices could create a new level of demand for the USDINR. Tomorrow, we will see range bound price action, if the mood and the soft dollar trend continue. “

Gourang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services

“The rupee has risen after hitting an all-time low earlier this week as domestic and global equities have bounced back from their lows. Despite the Fed chairman’s biased remarks, the dollar has bounced back to its 20-year high against its major crosses. In his interview, he promised that the US Federal Reserve would set interest rates as high as necessary to beat the rise in inflation, which he said threatened the very foundations of the economy. On the other hand, the dollar depreciated despite a sharp rise in US retail sales in April. Today, market participants will monitor housing numbers from the US and CPI numbers from the UK. The expectation is that inflation in the UK could be an inch higher and this could raise the possibility of further rate hikes by the Bank of England at its upcoming policy meeting. We expect USDINR (Spot) to trade sideways and quote between 77.05 and 77.80. “

Amit Pabari, MD, CR Forex Advisor

“After testing all-time lows in the first hour, the Indian rupee has moved towards the 77.50 mark as the domestic equity market has seen a recovery mode and has sharply corrected below the US DXY and 103.50 mark or has declined 0.70%. Another reason behind the recovery in the rupee may be the rush of exporters to lock the 80+ rate in the long run and offload the RBI’s yard dollar to calm the negative sentiment. Today, the USDINR pair is expected to open around 77.45 level and will probably trade between 77.20 and 77.70 zone. On the local front, equities have jumped more than 2.50% due to the global market recovery. However, FIIs were also a net seller in such recovery markets. Domestic yields have started to rise again due to higher oil prices and this could force the RBI to be aggressive in raising their policy. Oil rally could again limit rupee pullback. Thus, the pair can be seen trading in a wide range of 76.80 to 77.80 in the short term and 76.50-78.50 in the medium term. “

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