The Indian rupee opened higher at 81.64 per dollar on Wednesday versus yesterday’s close of 81.72. The domestic currency is expected to appreciate amid positive domestic equity markets, strength in Asian peers and weakness in the greenback. In the previous session, rupee slipped against the US dollar as rising crude oil prices in the international market weighed on forex market sentiment. However, a firm trend in domestic equities and a weak American currency overseas capped the losses in the local unit. At the interbank foreign exchange market, the local unit opened strong at 81.58 but settled at 81.71, registering a decline of 3 paise over its previous close of 81.68.
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“Rupee is likely to hover around 81.40 to 81.80 levels. From the last 7 trading sessions, the USDINR pair is trading in a narrow range due to mixed investor sentiment, and it is observed whenever consolidation happens it gives a move of 1-1.50 rupees on either side of a breakout. Investors remained in dilemma whether to be bullish or bearish as one side FII continue to pour money into local equities whereas Chinese currency continued to fall at a faster pace due to rising social unrest.”
“Well, the breakout in USDINR below 81.40 seems more likely due to domestic indices outperforming global indices amid better macroeconomic and political stability which makes India a favored destination for FII’s to pour in as witnessed by 32,000 crores of flows till now. Overall, risk-on sentiment in the EM currencies could push the pair towards 81.20 levels. Any uptick around 81.80-82.00 should be a good opportunity to sell in the near term.”
Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services
“Volatility remained for another session and market participants remain cautious ahead of the RBI policy statement scheduled next week. Expectation is that the central bank could raise rates by another 35bps and maintain a marginally hawkish stance. The RBI governor’s commentary on inflation and growth going ahead is important to gauge a view on the currency. The dollar earlier this week rose after a couple of Fed officials continued to push for higher rates in the upcoming policy statements.”
“Yesterday, the greenback extended gains despite consumer confidence number in the US falling to the lowest level in four months. This week, market participants will be shifting focus to the preliminary GDP, core PCE index and employment numbers from the US. Better-than-expected numbers could extend gains for the dollar. We expect the USDINR(Spot) to trade sideways and quote in the range of 81.40 and 82.05.
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Anand James – Chief Market Strategist at Geojit Financial Services
“A brief period of upsides failed to gather momentum, resigning USD-INR within the 81.70-81.53 band discussed yesterday. We may have to let go of the upside expectations, if USD-INR prefers the 81.6 – 81.53 vicinity early in the day, but will play a collapse only once below 81.35.”
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