Indian Rupee crosses 67-mark against US dollar; here is how it will hit your purse
The rupee has been hovering between 65 to 67 mark over past three months, and today it was trading at 67.113 up by 0.292 points or 0.44% against dollar index at around 1217 hours.
On interbank forex market, Indian rupee jumped over 67-mark against US benchmark dollar index today, which takes the domestic unit to over 14-month low. The rupee has been hovering between 65 to 67 mark in past three months, and today it was trading at 67.113 above 0.292 points or 0.44% against dollar index at around 1217 hours. In early opening of today’s trading session, the rupee was near 66.79 per dollar. A list of factors impact rupee, which is why, now analysts are expecting the INR to even clock over 68-mark. If that happens, the public may have to suffer as prices can go higher with the rising rupee.
The last time when Indian rupee trading over 67-mark was in February 2017. In January to February 2017, Indian rupee was trading at peak levels which came as a concern for Reserve Bank of India, as inflation, trade, exports and consumer products were affected.
Explaining the current rise in rupee, Amit Gupta and Gaurav Shah Research Analysts at ICICI Securities said, “The rupee lost sharply against US$ as well as other major currencies in April testing its 14-month lows near 67/$. A sharp rise in crude oil prices (testing four-year highs) and rise in global yields shook the domestic macro picture to a certain extent. Benefit of lower crude prices has been disappearing as oil appears firming at $65-$75 levels.”
Anindya Banerjee, Research analysts at Kotak Securities said, “Oil and yields continues to flank the Rupee. There is added factor, strong US Dollar.”
According to Banerjee, in US, economic data continues to point to a robust economic growth, tightening labour and building inflation pressures. Over the past week, one can sneer at the soft headline data from US, ISM, PMIs and NFP but underlying theme remained robust.
Such would ensure markets to remain robust following the trend.
“ All in all, we expect US Fed to become aggressive in their monetary policy stance. Unlike, other central banks, US Fed remains in a better footing, not plagued by political or economic risks which other DM central banks are facing,” adds Banerjee.
Therefore, a divergent monetary policy theme, alongwith divergent fiscal policy theme, coupled with large shorts in USD positioning could continue to fuel the rally in US Dollar.
Generally higher USD lead by tight monetary policy in US coincided with lower commodity prices, especially oil. However, Banerjee explains that the current trend of higher USD, rising rates and higher oil prices is kind of mini-storm for Rupee.
Technical analysis also reveals that USDINR can aim for 67.30/35 levels on spot, which houses the December 2016 lows of 67.32.
For ahead outlook, Banerjee said, “ We expect resistance around those levels but remember that when a carry currency faces unwinding risk due to worsening macro-economic scenario, market participants may not pay the due respect to technical resistances. In such scenarios, support levels works far better than they should and resistances prove to be more anaemic than should be.”
Coming back to the technical levels, Banerjee said “above 67.35, USDINR spot can aim for a cluster zone that runs from 67.60-67.80 and even towards 68.10 levels on spot. On a tactical basis, uptrend will be impaired if prices were to reverse below 66.30 levels on spot.”
Meanwhile, the duo at ICICI said, “we expect most negatives to have already been priced in. As such, the pair could consolidate in the range of 65.80-67.30/$. Also, record forex reserves with the RBI may be utilised in event of the next bout of sharp rupee depreciation.”
Hence, the duo suggest initiating short position in the pair as it may drift towards 66.40/$ unless we see a fresh rally in crude oil prices or adverse outcome from Karnataka polls.
Now it for sure that Indian rupee are tend to rise ahead. This can impact a list of sectors and also consumers.
Sectors like oil & gas, metal & mining, airlines, chemicals & fertilisers, paper & products are among the heavy importers and they witness sharp deterioration in their credit profile if rupee depreciates.
Your purchase of various product will get costlier. Here’s how.
India depends on imports for crude oil in heavy amount. Now crude oil has reached over four-year high by clocking over $70 per barrel mark. So the situation both rupee and crude oil prices are at peak level, which means the companies, investors as well as consumers will adversely be affected by the depreciation.
Products like soaps, detergents, deodorants and shampoos in FMCG sector are linked with crude oil, they may get expensive ahead.
Sectors like Pharmaceuticals & Drugs, Fertilizers, Electric equipment, Mining & Minerals, Aluminium and products, Diamonds & Jewellery, Pesticides & Agrochemicals, Textile- Manmade Fibers, Plastic Products, Consumer food, Refineries and steel depend on imported raw materials whose cost would increase with rupee depreciation. Such sectors will have to look for domestic alternatives depending on the price differentials taking into account rupee depreciation.
Refineries, steel, industrial gases and fuels, mining & minerals and aluminium industry are largely dependent on imports for their raw materials. The total raw material imports of these top 5 industries together account for more than 80% of the total raw material imported.
Import of capital goods is affected by rupee depreciation.
Therefore, when a depreciating rupee makes import of crude oil more expensive, this directly leads to an increase in the operating expense of the companies, which results in weak profit margins. Following this, the real burden is borne by the consumers, as most of the impact on the company from the rise in import prices of crude oil is passed on to the consumers.
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