Fears of the rupee breaching the 70-mark against the dollar eased in the week ended July 13 with the Indian currency closing at 68.50. However, given the current global scenario, will the rupee be able to pare losses or slide further?
For the week ended July 13, the Indian rupee added modest gains despite the dollar index moving higher against basket of currencies.
While high crude oil prices and continuous outflow of foreign capital resulted in the rupee depreciating in the past, positive cues from global and domestic markets added gains to the rupee during the week.
Crude prices traded lower after US President Donald Trump urged OPEC members to keep prices down. News of Libya ramping up oil production and exports brought crude prices under $75 a barrel. Trade war tensions also eased when China did not retaliate at the tariffs imposed by US.
Meanwhile, recent domestic economic data revealed that inflation had accelerated to 5 per cent in June from 4.87 per cent in May. This is, however, lower than investors’ expectations at 5.3 per cent, which has dissipated chances of another rate hike by Reserve Bank of India (RBI) in its August policy meet.
The dollar is also set to focus on the strong fundamentals and continue to remain higher.
With no major changes in the input variable for recent depreciation of the rupee, the USD-INR pair is likely to trade between 68.30 and 69.00 during July.
On the flip side, if domestic equities continue to attract inflows and crude price move lower, the USD-INR pair is expected to break its crucial support at 68.30 and find support at 67.70 in the coming sessions during the July Expiry. The chances of the rupee recording a fresh all-time low look minimal, but it would continue to remain on the lower side.
The author is a fundamental research analyst at Karvy Forex and Currencies Pvt Ltd