The Indian rupee is expected to depreciate on Monday (21 February), due to uptick in US dollar and risk aversion in the global markets. Further, higher FII outflows from domestic markets will continue to put pressure on the local currency. The rupee surged 40 paise, its biggest single-day gain in over three months, to settle at a more than two-week high of 74.66 against the US dollar on Friday on hopes of a diplomatic solution to the East-West standoff over Ukraine. A fall in crude oil prices also supported the local unit. At the interbank forex market, rupee opened at 75.03 against the greenback and witnessed an intra-day high of 74.60 and a low of 75.05 before settling at 74.66, up 40 paise from its previous close. The domestic currency has appreciated 70 paise against the US greenback.
FII outflows from domestic markets will continue to put pressure on the rupee: ICICI Direct
“The dollar index surged 0.32% on Friday as investors worried over escalating geopolitical tensions between Russia and Ukraine. Further, better-than-expected macroeconomic data from the US and risk aversion in global markets boosted the dollar. However, sharp gains were capped on decline in US 10 year treasury yields. Rupee February futures appreciated by 0.53% due to softer crude oil prices. However, pessimistic sentiments in the domestic markets capped further appreciation in the rupee. The rupee is expected to depreciate today, due to uptick in dollar and risk aversion in the global markets. Further, higher FII outflows from domestic markets will continue to put pressure on the rupee. US$INR (February) is likely to rise towards 75.0 levels for the day.”
Sugandha Sachdeva, Vice President – Commodity and Currency Research, Religare Broking
“The Indian rupee has strengthened by around 0.50% in Friday’s session, amid rising hopes of a diplomatic solution to the Russia-Ukraine crisis. Crude prices have also nursed steep losses after eight straight weeks of gains as the key risk to supply appears to fade for a while, which has further supported the sentiments for the domestic currency. Besides, minutes of the recent Fed meeting have been slightly dovish, which has cooled-off bets for an aggressive pace of rate hike this year-another tailwind for the local unit. Having taken out the key 74.80 mark, the Indian rupee now seems poised to test the 74.30 level in coming days.”
Gaurang Somaiya , Forex & Bullion Analyst, Motilal Oswal Financial Services
“Rupee at the start of the week was weighed down against the US dollar following uncertainty that Russia is preparing to invade Ukraine. According to the United States, Russia could make such a move at any time and might create a surprise pretext for an attack which reaffirmed a pledge to defend “every inch” of NATO territory. On the domestic front, market participants remained cautious also ahead of inflation number that was released in this week. Data showed CPI rose 6.01% in January as compared to 5.56% in the previous month. The uptick in the food basket was due to a sharp rise in prices of oils and fats which climbed 18.70% on year in January. But as the week came to an end, expectation of tensions receding between the two nations led to some appreciation for the rupee.”
“During the weekend, US state secretary said that all signs suggest Russia is on the brink of invading Ukraine. He also mentioned that his said his planned meeting with Russian Foreign Minister Sergei Lavrov was still set to proceed next week as long as Moscow did not go ahead with the invasion. More clarity will be needed before concluding that Russia will invade Ukraine soon. Today, volatility could remain low for major currencies as US markets remain shut on account of President’s Day. We expect the USDINR(Spot) to trade sideways and quote in the range of 74.50 and 75.05.”
Kshitij Purohit, Lead Commodity & Currency at CapitalVia Global Research
“The Reserve Bank of India (RBI) is anticipated to increase its foreign exchange market intervention to prevent dramatic fluctuations in the rupee’s value amid simmering geopolitical concerns on the Ukraine border and ahead of the country’s largest public share sale to date. Although a sinking rupee theoretically improves India’s export competitiveness, the currency’s unpredictable swings make calculating investment returns challenging, especially when India looks to be breaking ranks with global central banks on rate choices. The pair fell as risk sentiment improved following the easing of fears about the Russia-Ukraine conflict.”
“Technically, on the domestic front, USD/INR February is at its major support levels on hourly charts. If 74.62-74.60 zone gets breached on hourly charts on closing basis with ample volumes, we may witness prices testing support in 74.52-74.50 which is the next immediate level. On the upside, prices may get challenged in 75.00-75.05 zone which is a major technical as well as psychological level. Prices are trading below 15-SMA on hourly charts which may be seen acting as a dynamic resistance, 15-SMA is also resting around 75.00 levels which makes this zone even stronger.”
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