Trading of the dollar-rupee (USD-INR) pair within a range of 68.30 – 69 is becoming increasingly chaotic.
In the week ended July 20, most Asian currencies were dragged down by the US 10-year yields taking a support at 2.82 per cent and the dollar index moving above the crucial 95 after US Federal Reserve chairman Jerome Powell exuded confidence in the US economy and confirmed more rate hikes this year.
The Chinese yuan tumbled to its lowest level since July 2017.
In India, widening trade and fiscal deficit and the latest no-confidence motion against the central government triggered a panic button among foreign investors, who withdrew more than Rs 72,000 crore in the last six months. This and the crude price moving higher are keeping the rupee under pressure.
If crude prices come down by at least $2-3 per barrel as expected, it would help the rupee recover marginally. However, this wouldn’t cap the weakness amid dollar capital outflow. The USD-INR pair, which moved back to the range of 68.30 – 69 on closing for the week ended July 20, is likely to trade in the range. However, a break of 69.20 on closing basis might take the pair towards 69.70 in the near term.
The author is a fundamental research analyst at Karvy Forex and Currencies Pvt Ltd