Rupee struggles against the strong dollar and negative market attitude; the dollar may drop from its two-month high

Due to a strong dollar and gloomy global market attitude, the rupee was trapped between 82.90 and 82.60 levels the previous week. The dollar strengthened as tensions over the debt ceiling negotiations increased and Fitch placed the nation’s credit rating under review for potential downgrading. Better-than-expected economic statistics from the US boosted the speculations that interest rates may stay high for a longer period of time than anticipated, which led to the US Dollar gaining this week and reaching close to 2-month highs.

Before a slew of important economic data from the US, the dollar may pull back from its two-month high. Data from the US ISM manufacturing PMI are probably going to show that activity in the sector shrank for the seventh month in a row. Additionally, non-farm payroll data is expected to reveal that fewer jobs were created for the economy in May 2023 and that hourly wages are likely to rise more slowly than expected, signaling a slowdown in the US labour market that could relieve pressure on inflation.

With the price of crude oil declining and the likelihood of a correction in the dollar, we anticipate the Rupee will encounter a barrier near the 83.00 level once more this week and fall down to the 82.45 level. Market players will also closely monitor national GDP statistics. Despite global headwinds, it is anticipated that the Indian economy expanded by 5.1% in the fourth quarter and by 7% overall for the fiscal year.

A significant barrier has been created by the USDINR’s inability to surpass 83.00 levels over the past few months. As long as it maintains below the immediate resistance level of 82.85, we anticipate the USDINR pair to appreciate back towards 82.45 levels this week. If 82.45 is broken, the pair may continue to decline to 82.30. The trend can only be reversed and the door to 83.30/83.50 levels opened by a closure above 83.00 levels. As long as it maintains below 82.90 levels on Monday, the rupee future, which matures on June 27, may increase further till 82.60 levels.

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