By Raj Deepak Singh
Rupee depreciated intensely in the previous week breaking the major resistance level of 83.00 amid strong dollar, surge in US treasury yields and risk aversion in the global markets. Dollar and Yields gained momentum after the slew of robust economic data from the US signaled a resilient US economy, reinforcing expectations that the US Federal Reserve may keep rates higher for longer duration. To add on, FOMC meeting minutes showed that officials were divided over the need for more rate hikes, but most policymakers continued to prioritize the battle against inflation.
However, we don’t see the dollar index surpassing 104 levels ahead of major economic data from the US and in hopes for more Chinese stimulus measures. Data from the US is likely to show that activity in the manufacturing sector contracted for the fourth consecutive month and activity in the service sector continues to slow down. Moreover, eyes will be on US Federal Reserve Chairman Powell’s speech at Jackson Hole Economic Policy Symposium to get clues on the outlook for interest rates.
We expect Rupee to depreciate further till 83.30 level amid strong dollar and risk aversion in the global markets. Meanwhile, market participants will keep a close eye on critical economic data from major countries and statements from Jackson Hole Symposium to get clues on the rate trajectory across major countries in the globe. US$INR has breached 83.00 level, which was acting as a strong hurdle from the past 10 months. We expect the USDINR pair to rise further towards 83.30/83.50 levels in this week as long as it sustains above 82.75. Only a close below 82.75 levels may reverse the trend and open the door for 82.60/82.50 levels
For Monday Rupee future maturing on Aug 29th may depreciate further till 83.20 levels as long as it sustains above 83.00 levels.
(Raj Deepak Singh, Analyst – Currency, Commodity and Derivatives, ICICIdirect. Views expressed are the author’s own. Please consult your financial analyst before investing.)
