We think the rupee should trade with a depreciating bias and a fall towards 73.50 looks likely in the near term, says Sugandha Sachdeva, Vice president – Commodity and Currency Research at Religare Broking.
Indian rupee has extended the early gains and trading near the day’s high level at 72.52 per dollar, amid selling seen in the domestic equity market.
It opened higher by 9 paise at 72.72 per dollar against Friday’s close of 72.81.
At 14:49 IST, the Sensex was down 649.71 points or 1.28% at 50,142.37, and the Nifty was down 174.50 points or 1.16% at 14,856.50.
The Consumer Price Index (CPI) or retail inflation rate for the month of February 2021 surged to 5.03 percent and the Index of Industrial Production (IIP) contracted by 1.6 percent in the month of January, as per the data released by the Ministry of Statistics and Programme Implementation (MoSPI).
“With Biden passing the $ 1.9 trillion fiscal stimulus package, the question arises whether the US economy is still in need of an additional monetary policy support. Or like ECB policy, the Fed can also increase the volume of bond buying in order to calm the rising US yields. So next week’s Fed policy outcome is very crucial to set the overall mood of the market. Right now, higher risk appetite is keeping the spot below 73 zone. For next week, we expect USDINR spot to trade within 72.25-73.25 with a sideways bias,” said Rahul Gupta, Head Of Research- Currency, Emkay Global Financial Services.
Oil prices edged up on Monday, with Brent drifting near $ 70 a barrel, propped up by output cuts from major producers and optimism about global economic and fuel demand recovery in the second half of the year, reported Reuters.
“Global markets have factored in the impact of a high fiscal stimulus from the US. However, high inflationary pressure stemming from the fiscal package could consequently lead to a sooner-than-expected tightening of the monetary policy, putting upward pressure on US yields, the dollar index and will in-turn hurt the rupee,” said Sugandha Sachdeva, Vice president – Commodity and Currency Research at Religare Broking.
“Rising oil prices are also hurting the sentiments for the domestic currency and stoking inflationary pressures. We think the rupee should trade with a depreciating bias and a fall towards 73.50 looks likely in the near term,” she added.