USD vs INR: Rupee sinks again! Will it breach 93 against US dollar soon?

USD vs INR: The rupee fell 12 paise to close at a record low of 92.40 (provisional) against the US dollar on Tuesday, pressured by rising crude oil prices and sustained foreign fund outflows amid the West Asia crisis.

The local unit opened at 92.35 and slipped to an intra-day low of 92.47 before settling at its weakest-ever level. On Monday, the rupee had ended at 92.28, near record lows despite a marginal gain.

Why the rupee is falling

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The decline in the rupee is being driven by multiple global and domestic factors:

• Rising crude oil prices: India imports most of its oil. Higher prices increase dollar demand, weakening the rupee.
• FII outflows: Foreign investors are pulling money from Indian markets, leading to dollar outflows.
• Geopolitical tensions: The US-Israel-Iran conflict has increased global risk aversion.
• Strong dollar bias: Despite recent dips, the dollar remains supported due to uncertainty around US interest rates.

Dollar volatility adds pressure

Manoj Kumar Jain, Director at Prithvi Finmart, said, “The dollar index shows very high volatility and slipped from 9-1/2 month high… ahead of the FOMC meetings and profit taking in crude oil from higher levels.”

He added, “Uncertainty on the Fed rate cuts and US-Iran conflicts could support the dollar index at lower levels… we expect the dollar index to remain volatile this week… it could trade in the range of 98.85-102.55.”

Rupee outlook: volatility to persist

On the rupee, Jain said, “We expect a rupee to remain volatile this week amid volatility in the dollar index, volatility in the domestic equity markets and geo-political tensions… a pair could trade in the range of 91.0800-93.8000.”

He noted that the rupee had seen some support earlier from a pullback in the dollar index and recovery in domestic equities, but broader trends remain weak.

Technical view

From a technical perspective, Jain said the USD-INR March futures is holding above key support levels.

“A pair is trading above its moving average trend-line support level of 92.1700 and RSI is fetching above 60 levels. MACD is also showing positive crossover,” he said.

He added, “We suggest buying in the pair around 92.1200-91.8000 with a stop loss below 91.5500 for the target of 92.7000-93.0000.”

Outlook

Currency markets are likely to stay volatile in the near term. Movements in crude oil, global risk sentiment, and central bank signals will remain key triggers for the rupee.

Weekly range and volatility

As per data available, during the week, the exchange rate moved in a narrow band. It touched a high of Rs 92.5851 on March 16. It hit a low of Rs 91.7565 on March 12.
The sharpest single-day move came on March 12. The rupee saw a 0.77 per cent swing against the dollar on that day.

A wider view shows the rupee has been weakening gradually. The dollar has gained between 1.8 per cent and 2.2 per cent over the past one to three months.