USD/INR: Rupee Snaps Eight-Day Losing Run

The Indian rupee snapped its eight-day losing streak on Friday, appreciating about 36 paise against the U.S. dollar, largely driven by stronger Asian currencies and lower oil prices.

The USD/INR fell to an intraday low of 73.798 against the U.S. currency from Thursday’s close of 74.162. The rupee has lost nearly 129 paise so far this month and weakened about 79 paise on a weekly basis.

“The Rupee had opened weak and weakened further through the session. Stops got triggered above 73.85, resulting in a brisk move to 74.10. Even post OTC close, USD/INR got bid up as offshore positioned for further Dollar strength,” noted analysts at IFA Global.

“Considering that recent such moves have been short-lived, we expect volatility dampening to happen quickly. We, therefore, do not see a trending move higher in USD/INR at this point. The USDINR pair is expected to trade with a neutral to bullish bias for the day.”

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, rose 0.42% to 92.27. That was largely driven by the Fed’s dot plot released on Wednesday, which suggested an expectation of two rate hikes in 2023.

DXY has seen a classic short squeeze – the trigger being that 7 of 18 FOMC members felt that a first-rate hike could come in 2022. Interestingly, the response has been felt harder in FX than US Treasury markets, where the search for carry still sees strong demand at the long end of the curve. You would say that the chances of a bond tantrum are less, but that movements at the shorter end of the US yield curve are a dollar positive – especially against the low yielders,” noted analysts at ING.

“The US data calendar is light in the week ahead, but there are several Federal Reserve speakers every day. The highlight may be Fed Chair Powell’s testimony to Congress on Tuesday. Let’s see whether the Fed is prepared to adopt any new language on tapering. Were views to coalesce around tapering actually starting in September – not December – the dollar could rally further.”

The benchmark equity indices also snapped a two-day losing session, closing 21.12 points or 0.04 percent higher at 52,344.45, while the broader NSE Nifty fell 8.05 points or 0.05 percent to 15,683.35.

On the other hand, global oil benchmark Brent futures fell 0.6% to $72.61 per barrel. However, foreign institutional investors were net sellers in the capital market on Thursday as they offloaded shares worth Rs 879.73 crore, as per provisional data.