On Tuesday, the Indian Rupee is likely to weaken even more due to a strong dollar and gloomy market sentiment. After settlements, the rupee depreciated by 19 paise in the previous session to close at a record low against the US dollar. At the interbank foreign exchange market, the local currency opened weakly against the US dollar at 79.30, with a day’s high of 79.24 and low of 79.49.
The local currency ended Monday at a lifetime low of close to 79.44 per dollar after falling to several record lows in recent months. The Reserve Bank of India (RBI) announced on July 11 that it was putting in place a mechanism to settle international trade in rupees in the midst of the ongoing pressure on the rupee brought on by persistent FII outflows, elevated crude prices, and risk aversion in the markets.
“Given the strength of the dollar and the gloomy outlook for the world’s markets, the rupee is anticipated to weaken today. Investors will also pay attention to US inflation data that may affect the Fed’s decision to raise interest rates. Additionally, ongoing FII outflows and concerns about a slowdown in the global economy could cause the rupee to weaken.
The market is also anticipating India’s inflation figures, which are predicted to remain above 7 percent for a third straight month. In the meantime, RBI actions to permit free dollar flow into NRI accounts and the establishment of a mechanism to settle trade transactions in rupees may offer some support to the local currency, according to ICICIDirect.
Forex and Bullion Analyst Gaurang Somaiya of Motilal Oswal Financial Services
Rupee was under pressure and hit record lows as a result of the dollar’s overall strength relative to its main crosses. The RBI established a system yesterday for rupee settlements in international trade, which banks must obtain prior authorization to use. The mechanism is intended to “promote growth of global trade with emphasis on exports” and goes into effect right away. On the domestic front, today’s inflation report will be in the spotlight. It is anticipated that the number will be slightly higher than expected, which would support the RBI’s case for further rate increases. The primary U.S. economic focus this week is on consumer price data, which is due today. We anticipate that the USDINR(Spot) will trade favorably and quote between 78.70 and 79.50.”
Vice President of Commodity and Currency Research at Religare Broking, Sugandha Sachdeva
The Indian rupee has fallen to a new record low of 79.49 in line with the mighty dollar’s general strength. The likelihood of a string of aggressive rate hikes has increased as a result of the US economy adding jobs at an impressive rate in June, which is driving the dollar index higher. Concerns about higher terminal rates in the US and dimming growth prospects are driving safe-haven flows into the dollar, which is likely to weigh on the domestic currency in the short term. As a result, the dollar has soared to a new 20-year high.
“On the domestic front, pressure is mounting on the local unit due to worries about a widening trade deficit, which reached a record high of $25.6 billion in June. Additionally, during the week ending July 1, India’s foreign exchange reserves decreased by $5 billion to $588.31 billion, underscoring the fact that the RBI has been actively intervening in the foreign exchange markets to reduce the excessive volatility in the rupee-dollar exchange rate. We anticipate that the Indian rupee will weaken in the upcoming days toward the 80 to a dollar mark once it breaches the critical 79.50 mark, given the dynamics.
Research Analyst at Sharekhan by BNP Paribas, Anuj Choudhary
79.49 was a record low for the Indian rupee due to weak domestic markets and a strong US Dollar. While the Dollar index increased by 0.52 percent, domestic markets were down about 0.4 percent. Nevertheless, low crude oil prices had a calming effect. FII outflows totaled Rs. 109 crores on Friday. Rupee is anticipated to trade weakly despite a strong US Dollar. With the positive jobs report, the dollar is likely to strengthen even more. 372,000 new jobs were added to US non-farm payrolls in June, far exceeding the 260,000 jobs that were predicted. Expectations have increased that the US Fed may raise rates aggressively by 75 basis points in July. Markets may be watching data on US consumer inflation, which is predicted to increase to 8.8 percent from 8.6 percent last month. The rupee could trade between 78.80 and 80 in the upcoming sessions.
