Volatile dollar index will keep moving the rupee value, say experts

• For the next few sessions the rupee value is expected to be guided by the dollar index.
• Dollar index expected to remain volatile as it awaits data like US GDP and Non-Farm Payrolls (NFP) unemployment data and more.
• Most experts see rupee trade in the 82.7-83 band again, even as recovery attempts are at play.
  

The Indian rupee’s value against the dollar has been fluctuating for the last few days due to rising crude oil prices and a stronger dollar index. In the near term, it’s expected to trade in the 82.2-83 band in spite of recovery attempts, experts say.

On Wednesday, the rupee appreciated by 11 paise to 82.69 against the USD dollar in early trade. For the next few days the rupee value is expected to be guided by the dollar index.

The dollar index has been up by more than 2% this month over expectations of rates remaining high for a longer period. Most experts now see a 62% chance of rate hike in November 2023 from 42% earlier, says a Bank of Baroda report.

The Hawkish commentary of Fed chairman Jerome Powell at the Jackson Hole Symposium did not help. The index has turned volatile in the last two sessions and experts see more of it ahead as a lot of US economic data is expected this week.

“The upcoming week holds a flurry of important economic data, including US GDP and Non-Farm Payrolls (NFP) unemployment data, which are likely to contribute to heightened volatility in the market. Traders will closely monitor these data releases for potential market-moving insights,” said Jateen Trivedi, VP research analyst at LKP Securities.

Many more factors are expected to influence the dollar index. “In the short term China plays an important role in influencing the Dollar index. China is trying to boost its economy by a different rate cut and stimulus package which support Yuan and limited gains of the US dollar,” says Rahul Kalantri, VP Commodities, Mehta Equities.

Domestic factors & INR vs Dollar

The rupee has also been tracking the domestic markets which have been in positive territory with FII inflows and even IPO-specific inflows helped prop up the currency value in the last few sessions.

“Positive participation in the capital markets by FPIs and FIIs is contributing to the rupee's stability. As such, the rupee's trading range is anticipated to fluctuate between 82.45 and 82.95, with various factors influencing its trajectory," said Trivedi.

Crude oil prices are going up due to various factors and that’s been affecting any possible sharp gains on foreign inflows. The crude oil prices are also oscillating amidst supply concerns and demand worries. Brent crude is trading at around $83.6 per barrel, and its upward movements are key to rupee value in a country which is a net importer of crude.

In the near-term, the rupee value is expected to fall. “Recovery attempts are in play, but they are expected to be limited to 82.8. If it holds, expect an extended downside to 82.2. Else, expect to get back into the 82.7-83 band again,” said Anand James, chief market strategist at Geojit Financial Services.

Kalantri sees support for a rupee at 83.10 against USD. “In the short term, we are expecting USDINR might touch to 82.10 level while for the long term due to the central election this year we might see our rupee depreciate against the dollar which would push the rupee lower towards 83.5 and 84.7 level,” he added.