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The rupee (INR) hit a fresh lifetime low of 80.06 against the dollar (USD) on Tuesday before closing at 79.95. The Indian currency is being punished by a recovery in crude oil prices and continued FPI (Foreign Portfolio Investors) outflows. Nevertheless, going ahead, the rupee is expected to stabilise around 80 versus USD, whereas it is likely to weaken against other major currencies like the euro (EUR).
Euro factor
The rupee slid despite the dollar showing weakness over the past few days. That is, the dollar index (DXY), currently at around 106.6, is down by 1.8 per cent so far this week. At the same time, the INR has lost a marginal one-tenth of a per cent in the corresponding period. This is because the depreciation in the USD is largely restricted to major currencies like the EUR. Notably, the euro constitutes around 57 per cent of the currency basket used to construct the dollar index.
The European Central Bank (ECB), which was lagging with respect to monetary tightening, has now started considering hikes of a higher magnitude. They might hike rates by 50 basis points (bps) in the upcoming meeting on Thursday as opposed to 25 bps. This trend is likely to continue and, consequently, the USDINR currency might stay in a range. But on the other hand, the INR might depreciate against the EUR. Notably, the rupee has lost about 2.1 per cent against the euro so far this week.
Technical outlook
The rupee has been in a strong bearish trend against the dollar. While there are no signs of a reversal yet, the current level of 80 being a psychological number, could provide some breathing space. While INR may not gain against USD like EUR, it can be expected to stay sideways in the coming week, possibly between 79.80 and 80.10. That said, the broader bias remains bearish and eventually, the rupee might weaken to 80.50 – a support level.
Unlike against the dollar, the rupee will most likely weaken against the euro in the coming week. INR is forecasted to decline to 82.30 in the next few trading sessions from the current level of 81.87. A drop below the support at 82.30 can drag the rupee to 83 against the euro.
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