Rupee falls 90 paise to 82.73 against US dollar, key factors to watch ahead

Rupee ended Monday at 82.73 against the US dollar, 90 paise less than its previous closing. The dollar index, which compares the value of the dollar against six foreign currencies – Euro, Japanese Yen, Pound Sterling, Canadian Dollar, Swedish Krona, and Swiss Franc, was up 0.40 per cent at 103.33 after opening at 102.99. The United States' robust job sector, a recent uptick in global indices, and the RBI's policy decision on Wednesday are the main drivers of the currency market.

Pritam Patnaik, Head - Commodities, HNI and NRI Acquisitions, Axis Securities said “A surprising upswing in the US Non-Farm payroll, which came in at 517K, as against a forecast of 193K, helped rekindle the probability of future rate hikes by the US FED. The FED seems convinced that buoyant job markets will be a hindrance to its inflation control crusade, dashing the hopes of a movement from a hawkish to a dovish stance. This led to a significant correction in the Indian Rupee, the highest in the last four months.”

“RBI could provide some cushion to the falling Rupee, provided we see a rate hike and future guidance maintenance, suggesting more hikes. A dovish stance by RBI will not essay well for the INR. The street will pay a lot of attention to comments made by the US FED members, to try and predict future policy stances. An eye on how the equity markets and FII flows play out will also help in predicting the future price trend of the Rupee. We expect the RBI rate hike to provide some support to the prices and expect volatility to continue. The expected trading range is between 81.75 to 83,” added Pritam Patnaik.

Nisha Harchekar, Head - Equity Research at Fintoo said “The Indian rupee hit three weeks low at 82.78 per US Dollar today. The recent developments around the Adani Group and continuous selling by the FIIs is the key driver for the rupee to push below 82.00/$. FIIs continued to remain on the sell side after January recorded nearly ₹415 bn outflows in cash market. At the same, Dollar is regaining its strength after being in the downtrend since past few days after ECB & BoE didn't deliver a hawkish monetary policy. Both the euro & pound are on the back foot against the dollar. The recent rebound in USDINR from support of 81 should be seen as a major bottom with immediate target seen at 85. We feel the rupee weakness is likely to continue against basket of developed market currencies.”

Market expert Sugandha Sachdeva said “The Indian rupee has plunged lower by around 1 percent amid the broad risk aversion in the markets and the decline witnessed in other emerging market currencies. This can be attributed to the steep recovery in the dollar index toward a one-month high. The impressive US Jobs report for January has spurred bets that the US Fed will stick to its hawkish narrative for longer than previously anticipated, thereby propping the US dollar. The probability of further rate increases in March as well as May has increased substantially. Besides, tensions between US and China have also rattled the sentiments for the Asian currencies. All eyes are now on the RBI monetary policy where the central bank is likely to hike rates by 25bps, while the monetary policy stance for the year ahead will further steer the direction of the domestic currency. The local unit is expected to remain supported by the crucial 83.20 mark, while any breach of the same would push it towards new record lows.”

Based on the technical outlook of the currency pairs Amit Khare, AVP- research commodities, Ganganagar Commodity Limited said “INR is under pressured by concerns around the Adani group and the continue FII outflows from Indian equity market. Dollar got a boost on Friday after the US jobs data release showed an unexpected surge in jobs-added for January, US payroll data was in favor of US dollar. Technically USDINR 24th February contract showing some profit booking indication, 82.90-83.20 are some important resistance, where 82.40-82.00 are major support for USDINR.”

With Brent crude futures trading 0.50 percent higher at $80.33 per barrel and WTI crude futures holding steady at $73 per barrel on Monday, crude oil prices successfully recovered from their lows.

Indian equity benchmarks BSE Sensex and NSE Nifty50 ended on a red note on Monday. NIFTY 50 settled at 17,764.60, down by 89.45 points or 0.50% whereas Sensex closed at 60,506.90 level, down by 334.98 points or 0.55%.