Indian Rupee: Likely To Be Under Pressure

12 Apr 2022 , 08:54 AM

Surging American dollar supported by spiking treasury yields ahead of US inflation data is expected to bring the Indian rupee under pressure in opening trades on Tuesday, 12 April 2022. Besides, overnight rebound in crude oil prices are likely to further dampen rupee sentiments.

On Monday, rupee pared initial gains to settle almost flat at 75.94 against the US dollar. At the interbank foreign exchange market, the rupee opened at 75.94 against the American dollar and oscillated between a high of 75.79 and a low of 76.09 during the session. The rupee finally settled at 75.94 against the dollar, down 1 paise from the previous close. On Friday, the rupee appreciated 10 paise to settle at 75.93 against the US dollar.

Domestic equity benchmarks ended with modest losses on Monday, tracking weak global stocks. The S&P BSE Sensex shed 482.61 points or 0.81% at 58,964.57. The Nifty 50 index fell 109.40 points or 0.62% at 17,674.95. Foreign portfolio investors (FPIs) sold shares worth Rs 1,145.24 crore, while domestic institutional investors (DIIs), were net buyers to the tune of Rs 486.51 crore in the Indian equity market on 11 April, provisional data showed.

Overseas, Asian stocks are trading lower on Tuesday, as investors continue monitoring developments surrounding the Covid situation in mainland China. The major Chinese city of Shanghai has accounted for most of mainland Chinas new Covid cases and was in lockdown about a week after a two-part shutdown was originally supposed to end. The World Health Organization said Monday it is monitoring the Covid situation in mainland China, where officials have been battling a major surge in cases.

US stocks fell Monday as investors grew increasingly concerned a three-year high in the benchmark U.S. interest rate would start to slow the economy. U.S. inflation data is also expected to be out later Tuesday stateside and could provide more clues on the outlook for Federal Reserve policy. Oil prices dropped on Monday amid fears that Covid lockdowns in China would depress global demand. International benchmark Brent crude declined 4.18% to settle at $98.48 per barrel.

Meanwhile, the dollar index was back above 100 on Tuesday morning, supported by high U.S. yields ahead of inflation data that could reinforce expectations of aggressive Fed tightening policy. The index stood at 100.11, testing last weeks near two-year high of 100.19. US longer term yields continued their march higher. The yield on benchmark 10 year notes rose to 2.836%, its highest since December 2018. If Tuesdays early advance holds it would be the eighth straight session of gains for benchmark yields.

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