Rupee may fall to 69.50 on global risk aversion

Mumbai: The Indian rupee may depreciate towards Rs 69.50 against the dollar in the week to Mar 29, given the increasing risk aversion amid likely overseas fund outflows from local stocks and month-end dollar demand from oil importers, dealers said.

"Inflows into local stocks market will bottom out, and today we have seen heavy amount of outflows. Also, concerns of recession starting in the US and economic slowdown globally will raise safe haven bids for dollar. Apart from all these factors, month-end dollar demand will also weigh on rupee demand," said a dealer with a private sector bank.

Rupee may trade in Rs 68.25-69.50/$1 range in the week March 29 compared to Rs 68.34-69.17/$1 range seen in the previous week, a poll of nine foreign exchange dealers showed.

Hiren Sharma, CEO of Portia Advisory Services, said, "We may have already seen Rupee biased March-month levels and with RBI's Forex Swap arrangement scheduled tomorrow (Mar 26, 2019) and global downturn, the pressure may extend for Rupee. This is the last week for Indian financial year 2018-19, settlements-positioning-closures would be seen".

Risk-appetite sagged on fear of recession hitting the world's biggest economy, following weak economic data from the US and Europe on Friday, which was the main catalyst behind the lift in global growth concerns.

Adding to that, dismal German manufacturing survey released on Friday also raised concerns for Europe's biggest economy and the Euro zone.

Concerns over the health of the world economy along with last week's cautious remarks by the US Federal Reserve pushed the US 10-year treasury yields to the lowest since early 2018.

Longer-dated US bond yields traded below shorter-dated yields, which is a scenario that often occurred before US recessions in the past.

Adding to that, crude oil prices headed lower as concerns of an intense global economic slowdown outweighed supply disruptions from OPEC's production cutbacks and US sanctions on Iran and Venezuela.

Brent futures for May delivery traded 0.90 per cent down at $66.43 a barrel on Monday.

The main focus for this week in the domestic front is the RBI's $5-billion FX swap auction to be conducted tomorrow from 9.30AM-11AM mainly to address liquidity in the market.

The RBI FX swaps auction will be conducted on tomorrow and the buy/sell swap will run up to Mar 28, 2022, or for three-year duration.

This aid to durable liquidity was to counter expected crunch owing to advanced tax outflow (estimated at Rs 1.5 trillion) and GST, which is estimated at Rs 1 trillion.

Today, local stocks indices ended lower tracking sell-off in global markets, triggered by sluggish macro data raising fresh concerns of a slowdown in global economy.

The US manufacturing activity fell to 21-month low, index in Euro zone plunged to its lowest level since 2013. US Fed had also assigned cautious outlook on US economy after the latest policy meet on March 20.

Analysts believe, ff the weakness in the US and Eurozone region ignites, it would have significant bearing on global equity or vice-versa.

On Friday, the 30-share Sensex plunged 0.93 per cent to 37,808.91 on the BSE, while the 50-share Nifty slumped 0.90 per cent to 11,354.25 on the National Stock Exchange.

— TickerNews Service