After hitting a record high of 83.42 against the US dollar on November 10, the Indian rupee has stabilized and is expected to witness a range of movement in the coming week amid a lack of fresh triggers, analysts said.
The US dollar is headed for its biggest weekly drop in months against the euro, yen and franc on Friday. The 10-year U.S. Treasury yield also hovered near two-month lows.
The fall in the greenback and bond yields comes in anticipation that the US Federal Reserve will not raise interest rates and pivot to a rate cut early next year.
The rupee is up just 0.1% this week against the US dollar, compared to a 1-2% rise in other Asian currencies.
Read also: The rupee, its fall, slight recovery and what the RBI did
“The recovery in the domestic stocks supported by foreign fund flows and lower oil prices provide support to the local rupee. The rupee has been a stable currency among the Asian currencies as we know that the intervention of the central bank is around 83.30 level and the demand of importers/hedgers is around 83 level,” said Dilip Parmar, Research Analyst, HDFC Securities.
However, the Indian currency was largely unable to benefit from the drop in US Treasury yields, a softer greenback and the drop in oil prices, which hit four-month lows on Thursday.
The yield on the 10-year US Treasury fell to 4.30% from 4.75% as the market anticipated that the US Fed would not raise interest rates at the next policy meeting in December.
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“The rupee has been trading in its own cloud not reacting to global concerns on expectations of better dollar inflows in the domestic bond market and ease of selling in domestic equities. We believe the rupee holds the range of 83.00 to 83.30 for a few more days on average from the absence of fresh triggers that push or pull from the said range,” Parmar added.
Meanwhile, data this week showed the US consumer price index was unchanged in October and the core index rose 0.2%, weaker than expected. Product prices fell by the most in three and a half years. Additionally, the number of Americans filing new claims for unemployment benefits increased more than expected.
Jigar Trivedi, Senior Research Analyst – Currencies and Commodities at Reliance Securities also believes that the USDINR pair is trading in a range.
“The pair is in the range of 83.00 – 83.30 and it is still challenging to take a call. The lower forecast economic data from the US pushed the pair to the low point of the range, however it has rebounded. The weakness in crude oil also did not play into the rupee’s favour. The outlook is limited and needs to be confirmed for a breakout on both sides,” Trivedi said.
Read also: Rupee falls 2 paise to 83.25 against US dollar in early trade
Rupee has shown resilience against the US dollar after hitting a record low last week. Going forward, factors such as foreign fund flows, crude oil prices and trends in domestic equities would continue to drive rupee returns.
On November 17, the rupee was trading lower at around 83.27 to the dollar.
Meanwhile, crude oil prices traded higher after sinking about 5% on Thursday to their lowest in four months.
Brent futures traded 0.18% higher at $77.56 a barrel, while US West Texas Intermediate crude (WTI) gained 0.10% to $72.97.
Disclaimer: The opinions and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Updated: 17 Nov 2023, 14:44 IST