The rupee saw a high-voltage week in the domestic currency market, falling from 81.21 to 82.77 before ending at 82.28, losing more than a percentage point. Better global cues, lower crude oil prices, the central bank buying dollars, and inflows of foreign funds all weighed on the rupee, making it difficult for it to advance.
Following the development of higher peaks and bottoms on the daily chart, the technical setup for spot USDINR is still positive. The pair is seeing strong support and resistance at levels around 81.10 and 82.90, respectively. Given the recent general underperformance, lower crude oil prices, and year-end rebalancing, it is anticipated that the USDINR will largely consolidate in the band of 81 to 83 during this month.
The strength of the dollar is expected to increase for the first time in three weeks thanks to a variety of economic reports. U.S. PPI came in at 7.4% y/y for November as opposed to the market expectations of 8.1%. In addition, the Core PPI increased to 6.2% y/y from 6.0% predicted and 6.7% in the preceding readings. The University of Michigan’s (UoM) U.S. Consumer Sentiment Index preliminary readings for December increased to 59.1 from 53.3 market expectations and 56.8 final readings for November.
The US figures from the previous week made it abundantly evident that the US Federal Reserve’s battle against inflation is far from over. At this week’s meeting, policymakers are likely to announce a 50-basis-point increase and maybe a 5.0% peak rate in the dot plot.