Rupee Depreciates To 74.39 Against Dollar Tracking Muted Domestic Equities

The rupee depreciated 15 paise against the US dollar on Friday, August 20, to settle at 74.39 (provisional), tracking a muted trend in the domestic equities and a stronger American currency in the overseas market. At the interbank foreign exchange market, the local unit opened lower at 74.38 against the dollar and touched an intra-day high of 74.38 during the session. It witnessed a low of 74.47. In an early trade session, the domestic unit slumped 16 paise to 74.40 against the greenback.

On Wednesday, August 18, the domestic unit settled at 74.24 against the American currency. On Thursday, the forex market was shut on account of Muharram. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.09 per cent higher at 93.65.

What analysts say:

Mr Amit Pabari, MD, CR Forex:

”The US DXY managed to test 93.50 – its highest level for the year and counter pairs like EUR, GBP, AUD remained under pressure. 

The Asian peers are also trading lower, setting a new low for the year as COVID restrictions are mounting a doubt over the health of the global economy. The IPO markets are still hot and could attract flows, but RBI stands tall to limit appreciating move in the rupee.

The rising forex reserves and falling forward books are evidence that RBI is building their reserves and that they will use them when the situation will be against all odds. 

The ongoing bullish move in US DXY, corrective move in global equities, and RBI’s clear stance on the buying front suggest a higher chance of the USDINR pair to cross its immediate resistance of 74.40-50 levels convincingly and jump towards the resistance of 74.80-90 levels. If it crosses these levels, then we can set a target of 75.30-75.50 over the medium term.”
 

Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities:

“Even with US Dollar Index at a fresh high for 2021, USDINR has hardly moved. Spot closed 14 paise higher at 74.38 but well within a the range of past one month of 74.10 and 74.50 levels. Hawkish comments from US central bank members and weak stock markets could not push USDINR higher due to lumpy corporate $ flows. Over the near term, we expect USDINR to trade within a range of 74.25 to 74.80 on spot.”

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

“Rupee fell in the opening session as the dollar rose sharply against the US dollar after the release of FOMC meeting minutes that showed Fed members largely expect that later this year they will reduce the central bank’s emergency monthly purchases.

The minutes also magnified the importance of the next few monthly jobs reports, with solid gains needed to meet the Fed’s expectations and show the virus has not begun to again slow the economy.

 We expect the USDINR (Spot) to trade sideways with a positive bias and quote in the range of 74.05 and 74.50.”
 

Kshitij Purohit, Lead International & Commodities at CapitalVia Global Research Limited:

”The INR pair falls 0.06 percent intraday as a result of the U-turn from the significant resistance junction of the 200-day moving average and the falling trend line from July 21. The rupee’s volatility has decreased greatly as a result of the RBI’s clearance for local banks to engage in the offshore rupee market, allowing the rupee to stay broadly steady.

The calmer conditions in the local currency market are expected to continue. Despite continued geopolitical tensions between the United States and China, the rupee remains stable against the dollar. However, as we approach the US election season, there is a great deal of uncertainty about the direction of the rupee exchange rate.”

Domestic Equity Markets Today:

On the domestic equity market front, the BSE Sensex ended 300.17 points or 0.54 per cent lower at 55,329.32, while the broader NSE Nifty slipped 118.35 points or 0.71 per cent to 16,450.50.  The Sensex fell 615 points and the Nifty 50 index touched an intraday low of 16,376.05. Reliance Industries, Tata Steel, Kotak Mahindra Bank, were among the top drags on the Sensex.
 

Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities:

”In this four-day trading week, the markets started on a positive note but failed to sustain the gains. Sensex 30 and Nifty 50 recorded new closing highs earlier in the week. However, with corrections towards the end of the week, the BSE Sensex 30 and Nifty 50 witnessed a marginal decline on the weekly basis. 

On the sectoral front, BSE metals dropped by ~6.8 per cent followed by BSE Realty and BSE Bankex that declined by 3.8 per cent and 3.2 per cent respectively. In a relatively subdued market sentiment, BSE IT outperformed the markets by gaining ~1.6% during the week.

After witnessing some spike last week, the U.S. 10 year treasury yield this week remained in a narrow range, closer to 1.25 per cent. Oil prices have seen correction this week due to growth slowdown concerns amid a spike in COVID-19 cases globally. China has kept its benchmark interest rate unchanged.”

According to exchange data, the foreign institutional investors were net sellers in the capital market on August 18 as they offloaded shares worth Rs 595.32 crore Brent crude futures, the global oil benchmark, fell 0.59 per cent to $ 66.06 per barrel.