Rupee gives up some gains as Chinese yuan dips on softer-than-expected economic growth, ends at 81.91 per dollar
2 min read 06 Mar 2023, 03:16 PM ISTRupee took lead in the gains in Asian currencies against the US dollar. South Korean won and Malaysian ringgit also appreciated. However, the upside was capped due to fears that central banks across the globe would keep raising rates and the Chinese government setting a modest growth rate of 5% for the economy in 2023.
PremiumAfter touching more than one-month high, rupee gives up majority of its gains on Monday as the Chinese yuan tumbled against the US dollar. Although, rupee ended slightly higher, however, the upside was capped after the Chinese government set softer-than-expected economic growth for the current year. Factors like Federal Reserve Chair Jerome Powell's two-day testimony and US job report this week will play a key role in swaying rupee's movement against the greenback.
At the interbank forex market, rupee closed at 81.91 per dollar. During the session, rupee appreciated to 81.6350 per dollar -- which would be its highest level since January 31st.
However, Chinese yuan declined by 0.6%.
Earlier today, Rupee took lead in the gains in Asian currencies against the US dollar. South Korean won and Malaysian ringgit also appreciated. However, the upside was capped due to fears that central banks across the globe would keep raising rates and also the Chinese government setting a modest growth rate of 5% for the economy in 2023.
Last week, on Friday, the rupee closed at 81.9650 driven by strong foreign funds flow in the Indian equities and weakness in the dollar index. In the week that ended March 3rd, the rupee gained by at least 0.95% which would be its biggest weekly advance since mid-January against the greenback.
Sriram Iyer, Senior Research Analyst at Reliance Securities said, "Atlanta Fed President Raphael Bostic said that the Fed could look at 25 bps increases and said the central bank could be in a position to pause rate hikes sometime this summer," adding, "Recent data, however, suggests that the Fed will continue rate hikes but how many, the pace and period of the rate hike (longer or shorter) will be the questions to ask now."
Also, as per the CME FedWatch tool, markets are still factoring at at least 2 rate hikes in the month of May of 25 bps putting the terminal rate near 5.25%.
Iyer believes the Rupee could open around 81.8500 to 81.8600 compared with 81.9650 in the previous session.
Meanwhile, Anand James - Chief Market Strategist at Geojit Financial Services said, "directional moves set in after 82.3 gave away. Given the steepness of the slide, a pullback may be expected, ideally towards 82, but we expect the down move to test at least 81.2 before a pullback evolves. Until then 81.78 may be employed as an upside marker."
In its report, ICICI Direct said, the rupee is expected to appreciate further amid a rise in global risk appetite, and weakness in the dollar. Also, the expectation of a decline in US factory order numbers could be negative for the dollar. US$INR has breached the key support of 50-day EMA support at 82.30 and slid below two week's consolidation range of 82.30-83.00. Hence, as long as it trades below 82.30, the pair is likely to slip further toward 81.60-81.45.
In its weekly outlook report, ICICI Direct said, the US dollar/rupee formed sizeable bear candle that engulfed past one month gain for dollar indicating presence of key hurdle at 83 mark which remains key hurdle going ahead.
According to the brokerage, rejection for dollar/rupee pair for third time in past five months near 83 mark indicate extended consolidation in the range of 83-81 levels.
The brokerage expects further appreciation in the rupee. It believes trajectory of dollar index and crude prices would be key monitorable this week.
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