Rupee to appreciate amid retreat in dollar, rise in risk appetite in domestic markets; USDINR resistance at 78

 Rupee appreciated last week majorly on the back of weak dollar and rebound in domestic markets. Meanwhile, sharp gains were prevented on persistent FII outflows and elevated crude oil prices Dollar index retreated from its recent high amid decline in US treasury yields and disappointing economic data from country. However, sharp downside was cushioned on risk aversion in the global markets, concern over slowdown in global economic growth and hawkish statement from Federal Reserve Chairman Powell. He said central bank would notch up interest rates as high as needed taking rates above neutral (rate at which economic activity is neither simulated nor constrained) to curb soaring inflation

We expect rupee to appreciate further this week till 76.90 amid retreat in dollar and rise in risk appetite in the domestic markets. However, further gains may be prevented as investors fear that rising crude oil prices will hurt trade and current account deficit. Additionally, investors will remain vigilant ahead of major economic data across globe. Manufacturing and Services PMI data from major countries are likely to show that activity in sector’s slowed down fuelling concerns over global economic slowdown.

The rupee closed at a record low of 77.72 against the dollar on Thursday, a loss to over 6% in the last one year as it gets weighed down by rising inflation, interest rates, exit of foreign investors and plunging markets. The depreciation is expected to impact the economy in general and various segments such as imports, mainly fuel prices, and push up inflation.