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Rupee Outlook and Strategy

* The US dollar slipped yesterday amid a decline in US treasury yields. Further, investors are worried that the Fed may tighten monetary policy too much, hurting the economy. Meanwhile, sharp downside was cushioned on risk aversion in global markets

* Rupee future maturing on December 28 depreciated marginally by 0.01% yesterday amid weak domestic market sentiments and FII outflows. However, sharp fall was prevented as RBI raised its repo rate by 35 bps to 6.25% and sounded hawkish over inflation outlook

* The rupee is likely to appreciate further amid weakness in dollar and sharp decline in crude oil prices. Also, RBI raised its benchmark interest rates for a fifth consecutive time and said GDP growth in India remains resilient while inflation is expected to moderate but the battle against inflation is not over. Meanwhile, sharp appreciation may be prevented on risk aversion in global markets and FII outflows. US$INR (December) may trade in a range of 82.10-82.55

Euro and Pound Outlook

* The Euro edged up yesterday mainly on the back of weakness in the dollar and betterthan-expected economic data from euro area. German industrial production declined 0.1% in October 2022 compared to the expectation of 0.6% drop. Euro area GDP data showed economy expanded by 0.3% in Q3CY22 compared to initial estimate of 0.2%

• The Euro is expected to trade with a positive bias amid a weak dollar. In the meantime, investors will remain cautious ahead of ECB President Lagarde’s speech to get cues on future monetary stance. EURUSD is taking support near 1.0450 levels. As long as it sustains above this level, EURUSD may rally back to 1.0550 levels. EURINR (December) is expected to trade in a range of 86.30-86.85

* The pound appreciated yesterday mainly on the back of weakness in the dollar. However, sharp upside was capped on risk aversion in global markets and disappointing economic data from Britain. Halifax house price index fell 2.3% in November, the largest fall since October 2008

* The pound is expected to trade with a positive amid weak dollar. However, sharp upside may be capped on pessimistic global market sentiments and expectation of poor economic data from Britain. Additionally, the market fears that higher borrowing cost could lead to deeper and lengthier recession. GBPUSD is holding support near 1.2100 level. As long as it sustains above this level pound may rally to 1.2270 levels. GBPINR (December) is expected to trade in a range of 100.10-100.80

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