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Rupee Expected To Fall Amid Strong Dollar And High Oil Prices

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Rupee Expected To Fall Amid Strong Dollar And High Oil Prices
23 Aug 2022
6 min read

News Synopsis

The Indian rupee is projected to stay under pressure as a result of risk aversion in equities markets, rising petroleum costs, and US dollar gains. According to experts, the USDINR spot price will trade in a band of Rs 79.20 to Rs 80.50 in the coming sessions. Today's focus will be on the preliminary manufacturing PMI numbers from the United States, the European Union, and the United Kingdom. The rupee fell to a 4-week intra-day low of 79.92 in the previous session. The rupee slipped 4 paise to settle provisionally at 79.87 per dollar. 

Weak domestic equities weighed on the rupee, as investors locked up profits following a recent surge. “ Following overnight rise in the dollar index, increased crude oil prices, and risk-averse emotions, the Indian Rupee might start the day on the back foot. In the Asian morning sessions, Asian currencies are neutral versus the dollar, but they may decline due to risk-off sentiment fueled by losses in regional equities markets. Indian 10-year rates jumped 1 basis point to 7.27% after reaching a high of 7.31% intraday.

On Monday, the spot USDINR rose 9 paise to 79.87, marking the fourth consecutive day of gains. Technically, the pair is in an uptrend, and clearing the psychological threshold of 80 would drive it towards the area of 80.50 to 80.70, while near-term support would be in the range of 80.50 to 80.70. "The Indian rupee stayed unchanged on Monday." The rupee began the day with slight gains due to falling crude oil prices and FII inflows. However, the gains were fleeting, as the rupee fell as a result of the strong dollar and risk aversion in local markets.

Domestic equities markets have fallen by about 1.25%. US Dollar gained on safe haven demand amid risk aversion in global markets and concerns over global economic slowdown and positive economic data from US. In August, the US Philly Fed Manufacturing Index increased to 6.2 from -12.3 in July. Weekly jobless claims in the United States declined to 250,000 for the week ending August 12 from 252,000 the previous week."

"Fed policymakers James Bullard and Mary Daly believed that interest rates should be raised further to keep inflation under control." However, dismal new home sales figures limited the extent of the improvements. We predict the rupee to trade lower as global risk sentiment deteriorates and the US dollar strengthens. Concerns about a worldwide economic downturn may also put downward pressure on the rupee. However, reduced crude oil prices and FII inflows may help the rupee. Market players may also be wary ahead of Fed Chair Jerome Powell's address on September monetary policy indications at the Jackson Hole Symposium later this week. In the next sessions, the USDINR spot price is likely to move in a range of Rs 79.20 to Rs 80.50."

TWN In-Focus