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Rupee Outlook and Strategy

• The US dollar resumed its slide yesterday as market participants anticipate that the central bank has limited room to continue its interest rate hikes. Meanwhile, risk aversion in domestic markets and a surge in US treasury yields prevented a sharp fall in the dollar. Market sentiments were hurt on recessionary fears and on concerns over a surge in Covid-19 cases in China

• Rupee future maturing on December 28 appreciated by 0.11% yesterday tracking weakness in the dollar and optimistic domestic market sentiments

• The rupee is likely to appreciate today mainly on the back of weakness in the dollar. However, sharp gains may be prevented on risk aversion in global markets and re-bounce in crude oil prices. Market sentiments were hurt as major central bankers have warned that they will have to hold interest rates higher for longer. US$INR (December) is facing strong resistance near 82.90. As long as it sustains below this level it may slip further till 82.45

Euro and Pound Outlook

• The Euro rallied by 0.22% yesterday on the back of a weak dollar and improved economic data from Germany. German business morale rose more than expected in December as the outlook improved despite the energy crisis and high inflation. Ifo Business Climate index rose to 88.6 in December from 86.4 in November. Additionally, ECB vice-president Luis de Guindos said it would keep raising interest rates to curb inflation and was not considering revising its own mid-term inflation target of 2%

• The Euro is expected to trade with a positive bias amid weakness in the dollar. However, sharp upside in the single currency may be capped on pessimistic global market sentiments and expectation of disappointing economic data from the euro area. A series of poor economic data from the eurozone drove worries among investors that the region is slipping into recession. EURUSD is holding support near 1.0550 levels. As long as it sustains above this level, it may rise back to 1.0650 levels. EURINR (December) is expected to trade in a range of 87.40-88.00

• The pound appreciated marginally by 0.04% yesterday amid weakness in the dollar and optimistic domestic market sentiments. However, sharp upside was capped on disappointing economic data from Britain

• The pound is expected to trade with a negative bias mainly on the back of weak global market sentiments and a series of disappointing economic from Britain. Meanwhile, sharp downside may be cushioned on weakness in the dollar. GBPUSD is likely to slip back till 1.2050 level as long as it sustains below 1.2250 level. GBPINR (December) is expected to trade in a range of 100.0-100.75

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