How will the rupee perform against the dollar next week. Read here

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The Indian rupee’s depreciation continued this week amid a strong dollar and steady outflows of foreign funds that offset support from gains from bullish domestic equities. On Friday, the Rupee closed at 79.25 against the US Dollar, down 12 paise from the previous close. The local unit hit a series of all-time lows in the interbank forex market over the past few weeks. Experts believe the rupee could be under pressure as long as the dollar stays above 102 and crude prices rise above $90 a barrel.

Anand James – Chief Market Strategist at Geojit Financial Services on current performance said: “Assessing the outlook for 78.6, we had lined up declines at 78.95 to drive ups at 79.17. such a move moved on the early lines yesterday, the bulls extended to 79.25, which ended up attracting selling pressure, and we are back in the 79.17-78.95 consolidation band, with only a slight expectation of a break.”

“The Rupee has traded weakly this week, hitting all-time lows below 79.25 as the rise in the Dollar Index near $107 pushed the Rupee lower,” said Jateen Trivedi, VP Research Analyst at LKP Securities.

Looking ahead to the week ahead, Trivedi said, “The global recession as well as uncertainty over risky asset returns puts the rupiah in a downtrend. The rupiah may continue to weaken until the index of the dollar remains above $102 and crude prices above the $90 dollar index at nearly 2 decades will keep further pressure on the rupiah.”

Amid a weak rupee, India’s foreign exchange reserves have taken a hit. Foreign exchange (forex) reserves fell by $5.008 billion to $588.314 billion in the week ending July 1 from the previous week, due to a sharp drop in foreign currency assets (FCA ). All reserve components have dropped.

According to RBI data, FCA reserves fell from $4.471 billion to $524.745 billion during the week under review. Additionally, gold reserves fell by $504 million to $40.422 billion during the week, while SDRs fell by $77 million to $18.133 billion.

Meanwhile, the country’s trade deficit reached a new high of $25.63 billion in June 2022, falling from $24.3 billion in May 2022. From April to June 2022, the trade deficit rises at $70.25 billion, according to the latest data. In June 2022, India’s merchandise exports stood at $37.94 billion, bringing the total to $116.77 billion in Q1FY23. On the other hand, imports soared to $63.58 billion in the month under review and accumulated to $187.02 billion in the first quarter of the current fiscal year.

Furthermore, this year, as of July 8, the exit of REITs in the Indian market amounted to 2,31,708 crore. Of the total, equities were the hardest hit with an outflow of 2,21,454 crore, while a sale to the tune of So far, 14,341 crore has been seen in the debt market. However, REITs were buyers of debt-VRR and hybrid instruments with an influx of 14,341 crores and 2,240 crore from now.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, also said: “If the trade deficit continues to remain high, further depreciation of the rupee above 80 to the dollar is likely in the next 2 months. REITs are likely to wait and watch the movements of the rupee before buying big in India.”

Earlier this week, analysts at Yes Bank in their Ecologue report said the widening trade gap to new all-time highs only heightens concern over the strength of India’s external account to weather the storm. such increases.

In their note, Yes Bank analysts said they were considering 3 scenarios for India’s current account balance with oil prices averaging $100/bbl, $110/bbl and $120/bbl for FY23. The note adds: “Despite some expected buffer on invisible inflows, CAD for FY23 is expected to be higher at $93-111 billion for FY23 ($47 billion for FY23). As a % of GDP, CAD is likely at 2.6-3.2% in FY23. lower import cover, AE tightening is likely to put downward pressure on USDINR, thus analysts expect the rupiah to hit the 81 per dollar mark by the end of the day. end of March 2023.

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