Daily Analysis & Commentary on USD/INR Exchange Rate

USD to INR Analysis & Commentary

Last Updated: Wednesday, 22nd Dec'21

Rupee rallied for the second day running as the RBI inspired gains on Monday continued to impact the market. Reports released last evening showed FPI's dollar outflow on Monday in both equity and debt was around $800 mio and that could have forced RBI to intervene strongly and prevent any panic dollar buying in the domestic forex markets. As speculative trading has nearly died down it was easier for RBI to control rupee's direction and we expect that the central bank could force the dollar down further around year end. Rupee had opened with a large positive gap at 75.72 yesterday against the previous day close of 75.9050, touched the low of the day at 74.75 in the opening minutes and then recovered sharply as dollar selling in the NDF markets triggered some stop loss orders in the domestic markets.

Rupee surged to the day's high of 75.40 by midday before some import covering by oil companies led to rupee giving up some of the gains and closing at 75.59. There was some dollar buying in the NDF markets after the closure of our interbank market but such buying was subdued and did not lead to any major dollar gains. The drop in global trading volumes can lead to some volatility but we still believe that fundamentally rupee is well placed and RBI, if we read them correctly, will want rupee to move towards 74.70/75.00 at year end. Slowing of FPI outflows will help and we expect that to happen. Keep your short dollar positions open.