(Time Zone: Arizona, USA)
Mr. Sriram Iyer, Senior Research Analyst at Reliance Securities
The Indian Rupee depreciated on Thursday against the U.S. currency weighed down by importers' month-end dollar demand.
The Rupee ended at 72.42 to a Dollar compared with 72.32 in the previous session.
Today's depreciation came despite the fall in the dollar index which fell to its lowest since early January 2021 this Thursday afternoon after dovish signals from the U.S. Federal Reserve.
Today's weakness could also be attributed to consistently higher crude oil prices and surging U.S. Treasury yields.
The 10-year U.S. Treasury yield held above the 1.4% level on Thursday afternoon, ahead of the U.S. Department of Commerce releasing its second estimate for 4th quarter GDP.
However, we expect in the next few weeks that FPI flows and a weak dollar could cap the depreciation bias of the currency.
Additionally, investors also need to ask the question of RBI's tolerance with the current level of the Rupee.
If RBI does intervene we could witness the Rupee may not break the immediate resistance of 72.10-72.00 levels, however, if the central is more tolerant we could levels as high as 71.70-71.80 levels in the short run. If not we could 72.60-72.70 retested again.
Meanwhile, Asian currencies appreciated this Thursday against the U.S. Dollar and capped weakness of the local unit.
The one-year forward premium was at 3.67 rupees against 3.84 rupees in the previous session.
Technically, the range for the USDINR spot pair is between 72.25-72.55 on an immediate basis. Positionally, we feel that the currency could remain with 72.00-73.00 levels.