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Indian rupee in line with other Asian currencies depreciated against US dollar amid surge in bond yields and higher crude oil prices  - HDFC Securities 

Indian rupee in line with other Asian currencies depreciated against US dollar amid surge in bond yields and higher crude oil prices. Rupee expected to open flat but expected to see strength following dollar inflows from MSCI month end rebalancing in equities portfolio. However, the gains could be limited following higher dollar index and crude oil prices

On Tuesday, spot USDINR closed with gains of 15 paise to 73.84. The pair has been trading in range of 74 to 73.60 since last couple of days. Technical breakout will be seen above 74.10 while falling below 73.60 will add pressure on USDINR.

Asia stocks fell on Tuesday after a jump in Treasury yields as investors priced in the start of Federal Reserve tapering and elevated energy prices. Oil held onto gains on fears of a global energy crunch. Brent was near the highest in almost three years, while WTI crude hovered above $75 a barrel

The greenback was mixed against its Group-of-10 peers as energy prices spiked and yield on the 5-year Treasury touched the highest since February 2020. Risk-on sentiment was dampened by uncertainty about contagion from China Evergrande Group’s unraveling and the U.S. debt ceiling.

Fed Chair Jerome Powell said Monday the inflation test for scaling back the bond buying has been met, while the employment test “is all but met.” Fed Governor Lael Brainard separately said the labor market may soon meet her yardstick for scaling back asset purchases, while New York Fed President John Williams noted that moderating bond-buying may soon be warranted.

vents to Watch: Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen to testify at a Senate Banking Committee hearing Tuesday.

Technical Observations

 * USDINR October futures closed above 20 days moving average, but the hurdle remains at 50 days MA i.e. 74.39.

* The pair has been consolidating in the range of 73.80 to 74.10 since last four trading session.

* Broadly, the trading range for pair remains 74.40 to 73.60.

* Momentum oscillator, Relative Strength Index of 14 days period is placed below center line but remains above average and direction is upward indicating positive momentum.

* USDINR October futures expected to tad lower following monthly dollar inflows and September month expiry.

* We expect USDINR October futures to tread in the range of 74.20 to 73.80.

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