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Rupee Outlook and Strategy

• In the past few days, the dollar has been moving in a tight range ahead of holidays and thin trading volume. In the last week of December volatility is usually low. Also, inflation data on Friday showed price pressure is ebbing in US, reinforcing expectations of smaller rate hikes from Fed. Yesterday US markets remained closed for Christmas holiday

• Rupee future maturing on December 28 appreciated by 0.19% yesterday tracking strength in other Asian currencies and optimistic domestic market sentiments. Meanwhile, FII outflows and surge in crude oil prices prevented sharp gains in the rupee

• The rupee is likely to appreciate today on the back of a rise in risk appetite in global markets and weakness in the dollar. Market sentiments improved on hopes of smaller rate hikes from the Fed and sentiments were even lifted after China announced that its requirement for travellers arriving in the country to go into quarantine will end in January raising hopes of wider economic reopening. However, a surge in crude oil prices may prevent sharp gains in the domestic currency

Euro and Pound Outlook

• In the past few days, the Euro has been moving in a range between 1.0660 and 1.0570 ahead of the holiday season and thin trading volume. In the meantime, weakness in the dollar, hawkish statements from ECB officials and better-than-expected economic data from the euro area continued to support the single currency

• The Euro is expected to trade with a positive bias for the day amid a weak dollar and optimistic global market sentiments. However, sharp upside may be capped in the absence of any major economic data. EURUSD is holding support near 1.0570 levels. As long as it sustains above this level, it may rise back to 1.0700 levels. EURINR (December) is expected to trade in a range of 87.60-88.40

• The pound has been showing weakness in the past couple of days mainly on the back of a series of disappointing economic data from Britain and as BoE was the only major central bank that signalled caution about raising rates much higher. However, weakness in the dollar cushioned further downside in the sterling

• The pound is expected to trade with a positive bias for the day amid weakness in the dollar and rise in risk appetite in global markets. However, sharp upside may be capped in anticipation of BOE remaining dovish next year and on concerns that costof-living crisis would eat into household finances. The GBPUSD is likely to rise back till 1.2150 level as long as it sustains above 1.2020 level. GBPINR (December) is expected to trade in a range of 99.80-100.50

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