The rupee recouped some of its previous session’s losses early on ThursdayThe rupee recouped some of its previous session’s losses early on Thursday, tracking a rebound in Asian equities after Wall Street shares eked out small gains as the US Federal Reserve indicated rates would rise in March.However, the moves in the energy-sensitive rupee are likely to be curtailed on elevated crude oil prices, which flew past $110. Investors’ caution remains on the Russia-Ukraine war keeping the US dollar well bid.”The Indian rupee is under pressure because of global risk aversion and increasing oil costs. By the end of the first quarter, the USD/INR might reach 76.000, and by the second quarter, it could be around 76.500,” said Kshitij Purohit, Lead International & Commodities at CapitalVia Global Research.”Given the generally inelastic demand for oil, particularly as the economy recovers, a higher volume of oil imports combined with higher oil prices this year would result in a higher import bill,” he added.The rupee opened at 75.76 against the US dollar, gaining further to 75.62, strengthening from Wednesday’s close of 75.80 per dollar.Higher inflation prospects from rising oil will keep the rupee weak, which is likely to widen the current account deficit further as India depends on imports for over three-fourths of its energy needs.”India’s trade and current account deficits may increase this year, as gold demand rises as a safe haven and a hedge against inflationary pressures. Factors that could have helped counterbalance net capital outflows as a result of risk aversion and impending Fed rate hikes have also faded,” said Mr Purohit.”Technically, the USD/INR pair reverses course from its best levels since late December 2021, hovering around 75.80 during Wednesday’s Indian trading session. The failure to pass an upward sloping resistance line from January 03 by the Indian rupee (INR) pair is the second in a row. Bears, on the other hand, are a long way from seizing power,” he added.Sustained foreign fund outflows have also not helped the Indian currency, either. But the Reserve Bank of India is ready to shore up the rupee.As per stock exchange data, Foreign Institutional Investors (FIIs) were net sellers in the capital market on Wednesday, as they offloaded shares worth Rs 4,338.94 crore.The dollar index, which measures the greenback’s strength against a basket of six currencies, was trading 0.13 per cent higher at 97.51.”US bonds and dollar rose after the US Federal Reserve Chair Jerome Powell signalled an interest rate hike lift-off, vigilance on inflation, and economic resilience and could keep the rupee under pressure,” Sriram Iyer, Senior Research Analyst at Reliance Securities, told Press Trust of India.Markets will continue to remain volatile, and the RBI could be present to curb excess volatility, Iyer noted.
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