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Rupee Outlook and Strategy

* US dollar gained on Friday amid a rise in US 10 year’s treasury yields. Further, the dollar was supported as the University of Michigan consumer sentiment for the US jumped to a 13-month high of 66.4 in February 2023 from 64.9 in January, beating market forecasts of 65

* Rupee future maturing on February 24 depreciated marginally amid muted domestic equity markets and sharp rise in crude oil prices

* The rupee is expected to depreciate today amid strong dollar and surge in crude oil prices. The dollar is hovering near its five week high on rising bet for prolonged Fed policy tightening after Labour department revised its CPI data higher for prior three months. Additionally, university of Michigan surveys showed one year inflation outlook of 4.2%, higher than the final number in January

* Meanwhile, investors await CPI data from India, which is likely to remain under RBI’s comfort zone for a third consecutive month. The US$INR likely to trade towards the level of 82.85 for the day

Euro and Pound Outlook

* The Euro depreciated almost 0.60% on Friday amid a strong dollar. Meanwhile, further downside was prevented as ECB board member Isabel Schnabel said the European Central Bank must still raise interest rates significantly as broad disinflation has not yet started. Also, rise in German 10 years bond yields supported the Euro

* We expect the Euro to trade with a negative bias for the day amid a strong dollar and pessimistic global market sentiments. Meanwhile, sharp downside may be cushioned as the ECB’s policymaker’s signalled that the bank needs to keep raising rates beyond March and must hold them at high levels for a while even if inflation falls. EURINR (February) is likely to continue trading in downward trend towards

* The pound dropped more than 0.60% on Friday amid weaker-than-expected economic data from Britain. The British economy contracted 0.5% MoM in December 2022, the first decline in three months and worse than market forecasts of a 0.3% fall

* The pound is expected to trade with a negative bias for the day amid a strong dollar. Further, it may depreciate on concerns that Britain may enter a shallow but lengthy recession, starting in the first quarter of this year and lasting five quarters. GBPUSD is likely to break the key support level of 1.1990 to continue its downward trend towards the level of 1.1920. GBPINR (February) is expected to drop towards the level of 99.80

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