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Rupee may depreciate on elevated crude prices, continuous FII outflows; USDINR pair to trade in this range

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The rupee is expected to depreciate today, due to rising crude oil prices and continuous FII outflows from domestic markets. Further, pessimistic sentiments in global markets will weigh on the rupee.

Rising for the fifth straight day, the rupee extended gains by 11 paise against the US dollar on Monday on the back of a weak dollar and softer crude oil prices amid hopes of a diplomatic solution to the Russia-Ukraine crisis. The local unit opened strong at 74.51 and later touched day’s high of 74.35 as crude oil traded below $95 per barrel. It later gave up some of the gains due to losses in the domestic equity markets and forex outflows, before finally settling at 74.55. Today, rupee is likely to depreciate on account of rising crude oil prices and continuous FII outflows, according to experts.

Rupee likely to depreciate on Tuesday: ICICI Direct

The dollar index declined 0.06% on Monday amid a decline in US treasury yields. However, a selloff in global markets and optimism about a diplomatic solution to the Russia and Ukraine standoff fading, prevented a further decline in the dollar. Rupee February futures appreciated by 0.15% due to weakness in dollar. However, a sharp appreciation in the rupee was capped on risk aversion in the domestic markets. The rupee is expected to depreciate today, due to rising crude oil prices and continuous FII outflows from domestic markets. Further, pessimistic sentiments in global markets will weigh on the rupee. Furthermore, investors will keep an eye on series of macroeconomic data from the US. US$INR (February) is likely to rise towards 75.10 levels for the day.”

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Heena Naik- Research Analyst – Currency, Angel One Ltd

“On 21 February, USDINR spot made a gap down opening at 74.50 levels from its previous closing of 74.66 levels. From thereon, it plunged towards 74.35 levels on back of suspected IPO related inflows into the system. However, opportunistic dollar buying by importers as the geo—political risks still lingers pushed the USDINR spot higher towards the end. In the upcoming session, USDINR spot is likely to go further lower towards 74.20 levels as markers gear up for LIC IPO. Further, down the line, a meeting between Russia and US foreign ministers is expected this week – a probable ray of hope for the markets.”

Gaurang Somaiya , Forex & Bullion Analyst, Motilal Oswal Financial Services

“Rupee traded with high volatility within a broader range as uncertainty between Russia and Ukraine continued to keep market participants on the edge. In the first half rupee appreciated marginally but gains remained restricted after the Kremlin said there were no concrete plans for a summit over Ukraine between the Russian and U.S. presidents. Russian President recognised two breakaway regions in eastern Ukraine as independent on Monday and ordered the Russian army to launch what Moscow called a peacekeeping operation into the area, accelerating a crisis the West fears could unleash a major war.”

“Putin told Russia’s defence ministry to deploy troops into the two regions to “keep the peace” in a decree issued shortly after announcing recognition for Russian-backed separatists there, drawing U.S. and European condemnation and vows of new sanctions. Market participants await more updates on the escalating situation between Ukraine and Russia and that is likely to trigger volatility in the coming days for major currencies. On the economic calendar, preliminary manufacturing PMI number will be important to watch. We expect the USDINR(Spot) to trade sideways and quote in the range of 74.40 and 75.05.”

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USDINR Short term sentiment appears oversold: Kotak Securities

“RBI intervention becomes a live risk as prices near 74.00 levels as Rupee has been quite strong over the past week and generally the central bank intervenes whenever Rupee shows indication of a sustained outperformance against its EM peers. Global risk sentiment remains fragile as equity markets keep dancing to every possible news from Ukraine. Having said that, unless market sees the risk of a conflict as a clear and present danger, the impact of such headlines should fade with time. USDINR has bounced from 74.30/40 support zone. Short term sentiment appears oversold and momentum stretched on the downside. Hence, we could see a more two-way price action over the near term. USDINR can trade within a range of 74.30 and 74.75 levels.”



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