Indian rupee on cusp of falling under 69-mark against US dollar

The Indian Rupee is just few basis points away from touching a new record high of 69-mark against US benchmark dollar index. Currently, the Indian rupee was trading near at around 68.705 per dollar at interbank forex market. However, in the day it has touched an intraday low of 68.865 per dollar. Interestingly, in early opening, the rupee strengthened by 13 paise to 68.33 against the dollar on increased selling of the US currency by exporters and banks amid higher opening in the domestic equity market. With this, rupee continues to be the worst performer on emerging markets (EM).

According to Kotak Institutional Equities, rupee to open marginally weaker, around 68.54 on spot, as there is slight risk off mood across global equities. Asian currencies are trading flat against USD. Oil prices are down a percent after tweet from US President asking Saudi Arabia to hike output by 2 mbpd. There is a political uncertainty in Germany, which too may be affecting the risk sentiments. Chinese currency (CNH) is trading weak, around 6.64 against USD. 

Kotak added, “For the week, Rupee will take cues from the trend in local equity market and global equity markets as well as whether oil prices head lower or retrace all of the Monday losses and scale above 80 or not.”

Last week,  the Indian rupee was just 100 basis points away in marking 69-level as well. The domestic currency on Friday hit a new low of 68.900 against American currency at interbank forex market. It needs to be noted that, Indian rupee last time was at 68.909 in February 25, 2016, since then this would be a new low of the currency against dollar.

Our medium term view continues to remain negative on Rupee.

Anindya Banerjee, analysts at Kotak Institutional Equities said, “We have been bearish on Rupee since February on account pre-election year political risk, aggressive tightening from Fed and trade war. A lot more INR negative factors have emerged since then, especially with oil and our own monetary policy tightening. Hence, unless oil prices correct meaningfully, we expect USDINR to form a base between 67.00 to 69.00, before making a run for 71.50/72.00 levels later during the year.”

Banerjee explains, within that large range, we can expect 68.00 to 69.00 to become immediate play ground. Incase, USDINR breaks below 68.00, then only we can expect that the pair is going to expand the range to 67.00 and thereabout levels

For the week, Banerjee says, “we can expect further selling on USDINR as the pair has failed to sustain above 68.85 levels (previous all time highs). As a result, we would expect the pair can test 68.00 levels on spot, which if breaks can look for 67.70/75 levels on spot. Incase the pair reverse direction and start trading above 68.55, one can play USD long for a re-test of 68.85/90 levels on spot.”

But it needs to be noted that Indian Rupee is not alone in the boat of free fall, many other major currencies have followed the same trend. Currencies like South Africa, South Korea, Thailand, Indonesia, China have weakened more than the Indian currency.

Within the set of 15 currencies chosen here which have depreciated against the dollar, the decline in rupee was above the median value of 2.5%.