(Time Zone: Arizona, USA)
Mr. Sriram Iyer, Senior Research Analyst at Reliance Securities
The Indian Rupee depreciated against the U.S. Dollar on the back of importer demand for the greenback and dollar short covering.
The Rupee ended at 74.55 compared with 73.43 in the previous session. The rupee declined 1.5% today, its biggest fall since Aug 5, 2019.
Meanwhile, speculations of oil and telecom corporates were buying dollars vigorously in the spot market and foreign banks covering their dollar short positions weighed on sentiments.
Weakness in the Rupee could have been also due to investors aggressively pricing in a hawkish RBI stance and were left disappointed that there was not a more aggressive approach or in our opinion an extremely dovish stance taken by the RBI.
We say that because the language on the stance was updated from as long as necessary at least during the current financial year and into the next financial year to revive growth to today's stance as long as necessary to revive growth.
The RBI removed the time frame for the maintaining the accommodative stance.
The RBI retained its February forecast for the economy to grow 10.5% in the fiscal year that started Apr. 1, but warned that inflation pressures have risen from high commodity prices and logistics costs which may also weighed on sentiments this Wednesday.
The RBI said it will buy one trillion rupees ($13.5 billion) of sovereign bonds through June-end, a move that will infuse rupee liquidity into the market.
Meanwhile, the central bank also remained worried about the resurgence of a second wave of Covid-19 in the country and fear that the recovery of growth could be hampered. This too weighed on the markets.
Meanwhile, Asian currencies were broadly higher this Wednesday and had little impact on the markets.
The one-year forward premium was at 3.53 rupees, against 3.57 rupees in the previous session.
Technically, the USDINR Spot pair on a Weekly chart has given a breakout of Falling Channel formation where it has given a sharp surge above 50-Weeks Moving Average at 74.05 levels indicating a positive momentum to continue above 74.00 levels. Supports now are at 74.00 and 73.70. Resistances are at 74.70 and 74.90. The USDINR Spot pair could trade in a range of 74.10-74.70 levels in the next couple of sessions.
In the international markets, the dollar remained near two-week lows after U.S. bond yields eased from recent highs.
All eyes will shift to the Federal Reserve's meeting minutes due later in the session.
Technically, the Dollar Index is trading on negative note where it will hold a support of $92.30-92.05 levels from where we could witness a bounce back up to $92.85-$93.10 levels.