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USD/INR

The Indian rupee depreciated against the U.S. dollar for the fifth straight day on Monday as rising oil prices weighed on the currency despite strength in domestic equity markets.

The USD/INR rose to an intraday high of 73.2910 against the U.S. currency from Friday’s close of 73.24. The rupee has lost 49 paise in the last five trading sessions – its longest losing streak in more than two months.

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“The Indian Rupee declined further amid dollar demand. USD/INR pair settled 0.55% higher at 73.24.  The US dollar/rupee pair formed an inside bar indicating breather for rupee near strong hurdle placed at 72 levels over past six months,” Dharmesh Shah, Head – Technical, ICICI direct

“We expect the rupee to take a breather around 72-mark and consolidate in 72- 74 band. Only a decisive move below 72 would indicate extended gains for the rupee.”

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, fell 0.12% to 90.45. The index is expected to rise further after the relatively impressive US consumer price index data, which rose by 5% year-on-year – the highest since 2008.

The rupee was also under some pressure ahead of the Federal Reserve monetary policy meeting scheduled this week. Traders remain cautious ahead of the policy decision as any unexpected hawkish surprise would lift the greenback.

The Indian equity market witnessed a strong influx of retail investors, pushing the benchmark BSE Sensex index up 76.77 points, or 0.15% higher at 52,551.53, while the broader NSE Nifty gained 12.50 points or 0.08% to close at 15,811.85.

On the other hand, global oil benchmark Brent futures rose 0.94% to $73.36 per barrel. Foreign institutional investors were net buyers in the capital market on Friday as they purchased shares worth Rs 18.64 crore, as per provisional data.

The Indian rupee was one of Asia’s best performers, having risen 2.3% in May, but lost ground last two weeks. The USD/INR is expected to rise over 1% to INR 74.00 against the U.S. dollar rate over the coming year.

The domestic currency remained under pressure as the RBI slashed India’s growth projections down to 9.5 percent from the earlier evaluation of 10.5 due to the ongoing pandemic. Sentiments were further hampered after the World Bank axed India’s GDP projections to 8.3 percent for FY22, down from the earlier forecast of 10 percent,” noted currency analyst at Angel Broking.

“Steady increase in Oil prices, widening trade deficit and imports triggered inflation in India also added to the downside. However, bets on paced recovery in global economies and an accommodative stance by the US Federal Reserve limited the gains for the US Dollar. The Indian Rupee also found some support after the exports in the first week on June’21 stood at $7.71 billion, higher by 52.4 percent. The Indian Rupee might remain under pressure in the days ahead following the increase in demand for the Dollar in the global markets.”

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