By Raj Deepak Singh
Rupee depreciated towards the end of the week after better-than-expected US economic numbers boosted the Dollar. Also, weakness in the Euro prompted the dollar to mark its best gain in this month. The US advance GDP numbers surprised the market with a gain of 2.4% QoQ against forecast of 1.8%. Additionally, the drop in US initial claims to the lowest level since February, indicates that the US economy is resilient and reduces the possibility of US recession.
In the coming week, we expect the dollar index to face the hurdle near 103.00 and weaken towards 100.00 amid expectation of decline in US Job numbers and cooling wage inflation numbers. The US Nonfarm payroll numbers are forecasted to dip below the 200k mark for the first time since January 2022 and the annual wage inflation is expected to grow at a slower pace of 4.2% against previous record of 4.4%.
Further tighter credit conditions could also weigh on economic activity and inflation. Forecast for upcoming economic data from the US seems to signal that the economy is feeling the heat of rate hike and should support our view of a pause in rate hike from next meeting. The CME Fed-watch tool also suggests more than 79% probability of unchanged rates in September meeting, which might keep a cap on the upside in the dollar.
USDINR is likely to face the hurdle near the higher band of the 5-month consolidation range Rs 81.80-82.80 and slip back to Rs 82.00 level on expectation of correction in dollar. A move below 82.00 would weaken the pair further towards Rs 81.80. For Monday, Rupee future maturing on August 29th July may open near the Rs 82.30 levels.
(Raj Deepak Singh, Analyst – Currency, F&O, & Commodity, ICICI Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)