The Indian rupee marked the first weekly decline in the last five weeks amid a rebound in the dollar index and risk-averse sentiments. However, the Indian Rupee was one of the outperformers among the Asian peers amid foreign fund inflows in the secondary market and interest rate pause by the RBI in the recent monetary policy meeting. For the reported week, the rupee ended 0.3% lower than the U.S. dollar. The Indian unit traded in a wide range of 81.85 to 82.35 to the dollar. As far as the futures USDINR is concerned, it lost 19 paise or 0.23% to 82.09. India’s foreign exchange reserves rose for a second week to hit an over nine-month high of $586412 For the week ended April 14, the Reserve Bank of India’s (RBI) statistical supplement showed on Friday. The central bank intervenes in the spot and forwards markets to prevent runaway moves in the rupee As of now, in April the position of FIIs remains to be net buyers until now with a marginal surplus of 316 crores over this month. However, concern still remains sustained as buyers post witnessing consecutive FII selling in the previous week. On Friday, FIIs sold worth Rs 2116 crore highest selling of this month. Therefore, in order to support the Indian rupee FIIs needs to buckle up to change to the buy side amid global uncertainties. The short-term Rupee stability has not been disturbed amid the weak domestic market adding to it, some gains from Friday after data showed that India’s foreign exchange reserves rose to an over nine-month high in the second week of April. Still, the prospect of rising U.S. interest rates bodes poorly for Asian currencies, as the gap between risky and low-risk yields narrows. The next critical event is the US GDP on the 27th of April.

Dollar Index rose to 101.82, up by 0.80% last week against the previous week’s close of 101.55

Last week, market movements centered around central bank policy expectations, with limited clear alternate influences. Comments from Fed officials and recent economic data suggest that Fed’s tightening cycle is not over yet, this pushed US Treasury yields higher. A number of Fed speakers recently have argued for another 25-bps hike. Market participants have priced in an 83% chance, with many expecting the Fed to start cutting rates by the end of 2023. US macro data has been largely mixed, business activity accelerated to an 11-month high in April, but weekly jobless claims rose, indicating that the labor market may be starting to show signs of slowing, leading to a mixed performance. Lower U.S. yields have not dampened demand for the dollar, which is being supported by a risk-off environment. Data released on Friday (US/UK Service and Composite PMI) showed that US business activity expanded the most in nearly a year in April, bolstering the case for further monetary tightening.

Rupee spot (CMP: 82.06) expect crucial momentum between a range of 81.70 – 82.45

This week is going to be important and crucial as the focus will shift to GDP numbers out of the United States and Eurozone where both economies are expected to have hedged a recession, while the all-important PCE inflation report scheduled to release by April 27, will be one of the final pieces of the rating puzzle before the Fed’s May decision. For Dollar Index, sustaining above 101.50 on a closing basis will be considered stable. However, the US annualized GDP QoQ is due this week suggesting 2.0% growth in line positive for the Dollar Index, but any major difference in the actual number would break or make the situation of the Dollar Index. For this week, India’s Rupee outlook remains unchanged i.e we expect a range-bound movement amid global major events withholding the levels. Adding to it the performance of the domestic equities market needs to witness a green zone to support INR appreciation. A break below 82 on a closing basis in USDINR futures would see panic coming in.