Rupee to remain under pressure

Ahead of the US Federal chairman Jerome Powell's congressional testimony, the Indian rupee on Wednesday fell to an alltime low at 78.40 against the US dollar on Wednesday. The dollar was generally firm ahead of Powell’s testimony before the US Senate banking committee, on Wednesday and Thursday amid fears of recession. The street expects that the Fed will probably hike rates by another 75 basis points again in July.

At the interbank foreign exchange market, the local currency opened flat at 78.13 against the greenback and witnessed an intra-day high of 78.13 and a low of 78.40. The domestic unit finally settled at a record low of 78.40, down 27 paise over its previous close. In the previous session, the rupee had settled at 78.13 against the US dollar. The dollar index hovered near two-decade highs of 104.507. Foreign portfolio investors (FPIS) sold shares worth Rs 2,920 crore, taking their monthto-date selling tally close to Rs 45,000 crore.

Gaurang Somaiya, forex analyst at Motilal Oswal Financial Services, said, “Rupee fell towards fresh all-time lows especially as the dollar rose against its major crosses. The greenback rose ahead of the Fed chairman’s testimony. Expectation is that the commentary could be hawkish and that could

■ support the dollar at lower levels. Pound fell sharply after UK CPI in May came in line with estimates. We expect the USDINR to trade sideways but with a positive bias quote in the range of 77.70 and 78.50.”

Jateen Trivedi, vicepresident research analyst at LKP Securities, said, “Crude prices have shown some respite, hence the rupee has not fallen below 78.50 but the trend seen strong-weak for the rupee and the next level of support rupee falls near the 78.50 zone which can be tested in coming sessions if continued selling is witnessed along with higher dollar index position. The range for rupee can be seen between 78.10-78.50 going ahead."

Meanwhile, Bank of America in a note to its clients said that the rupee could extend declines to a record-low of 81 per dollar by year-end due to rising prices of crude and other raw materials. The currency has already slumped more than 5 per cent this year as Russia’s invasion of Ukraine sent Brent crude surging to

■ almost

March.

The rupee “has continued to depreciate beyond our expectation of a gradual trend weakness,” Abhay Gupta, a strategist at Bofa Securities said. “The fundamental outlook has deteriorated further primarily due to higher oil and other commodities.”

Still, the Reserve Bank of India’s reserve buffers and monetary policy tightening may help contain the prospect of an even larger depreciation, Gupta said.

Anindya Banerjee, vice president currency derivatives at Kotak Securities, said, “USDINR spot closed at an all-time high of 78.39, up 31 paise. Risk off sentiments and plunging forward premium caused the rupee to weaken. With forward yields quoting at the lowest levels since November 2011, the risk of carry trade unwind and low exporter hedging can worry rupee bulls. Over the near term, we could see USDINR trade within a range of 78.00 and 78.60 levels, with an upward bias.”

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