Market

Rupee more likely to respect on weak greenback, LIC IPO associated inflows; USDINR pair to commerce on this vary

The Indian Rupee is more likely to respect on Thursday amid retreat in US greenback. The native unit might power on LIC IPO associated inflows and as RBI shocked market by elevating charges to tighten liquidity, in accordance with Forex analysts. Rupee appreciated towards the U.S. greenback within the earlier session following RBI’s shock fee hike forward of the U.S. Federal Reserve’s coverage resolution. At the interbank foreign exchange market, the home unit opened at 76.46 towards the buck. It moved within the vary of 76.17 to 76.58 in the course of the session earlier than lastly settling at 76.40, registering an increase of 8 paise over its earlier shut.

Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services

“Rupee traded in a narrow range for the last few sessions and market participants remained cautious ahead of the important FOMC policy statement that was released yesterday. On the domestic front, in a surprise move, the RBI raised the repo rate by 40bps and also hiked the CRR by 50bps. The governor said that the policy action is aimed at lowering inflation and anchoring inflation expectations – will strengthen and consolidate the medium-term growth prospects of the economy. He added food inflation pressures are likely to continue. Inflation has now been above the upper limit of RBI’s 2%-6% tolerance band for a third straight month.”

“On the other hand, the Fed in its policy statement raised rates by 50bps and said that its $9 trillion balance sheet would be allowed to decline by $47.5 billion per month in June, July and August and the reduction would increase to as much as $95 billion per month in September. The dollar fell against its major crosses after the announcement as the size of balance sheet trimming was less than market estimates. The greenback fell also as the Fed Chairman mentioned that the US central bank is not considering 75bps rate hike, but added that additional 50 basis point jumps should be on the table for the next couple of meetings. Focus will now shift to the non-farm payrolls number that will be released from the US. We expect the USDINR(Spot) to trade sideways and quote in the range of 75.80 and 76.50.”

Rupee more likely to respect: ICICI Direct

“The rupee is expected to appreciate today amid retreat in US dollar. Further, rupee may gain strength on LIC IPO related inflows and as RBI surprised market by raising rates to tighten liquidity. However, sharp gains may be prevented on surge in crude oil prices. Additionally, investors will remain vigilant ahead of Opec+ meeting. US$INR (May) is expected to trade in a range of 76.20-76.65.”

Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities

“USDINR is sitting pretty on the lap of the option sellers. The rangebound price action between 76.10 and 76.75 on spot has allowed them to generate decent risk-adjusted returns. But as we have seen in the past, the longer the USDINR remains within a well-defined, the greater becomes the probability of a shift in that range, upward or downward. In this case, with RBI intervening aggressively to prevent USDINR from moving above 77 and the 21,000 crore LIC IPO adding the FPI flows, an upward shift in range appears unlikely. Therefore, markets may have to wait for $ to soften globally, before doing a downward shift in the range. Therefore, for now, we have to focus on short option strategies, even though the implied vols are low. One can even do hedged strategies, in order to avoid an unexpected range breakout or breakdown.”

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