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Rupee Outlook and Strategy

* The US dollar ended 2022 on a positive note. The Dollar Index was lifted by almost 8% last year amid aggressive monetary policy tightening by Fed and geopolitical tensions. The Fed has raised rates by 425 bps since March to curb soaring inflation

* Rupee future maturing on January 27 depreciated by 0.11% amid elevated crude oil prices and FII outflows. Meanwhile, a rise in risk appetite in domestic markets and upbeat manufacturing PMI data from India prevented a further fall in the rupee

* The rupee is likely to appreciate today mainly on the back of weakness in the dollar and optimistic domestic market sentiments. Additionally, improved economic data in India will continue to support the domestic currency. However, a surge in crude oil prices and ongoing concern’s on global economic slowdown will hurt the rupee. US$INR (January) is facing strong resistance near 83.10 levels. As long as its sustains below this level it may slip back to 82.70 levels

Euro and Pound Outlook

* The Euro depreciated by 0.32% yesterday as the euro area manufacturing PMI data showed that activity in the sector contracted for a sixth consecutive month. However, sharp downside was cushioned on hawkish statements from ECB officials

* The Euro is expected to trade with a negative bias on concerns that the euro area economy is heading for a recession. On top of this, market participants will keep an eye on CPI data from Germany, which is likely to show that inflation eased in December. Moderating inflation may convince the ECB to reduce the pace of rate hikes and even pause it. Meanwhile, weakness in the dollar and optimistic global market sentiments may cushion a sharp downside in single currency. EURUSD is facing strong resistance near 1.0700. As long as it sustains below this level, it may slip back to 1.0600 levels. EURINR (January) is expected to trade in a range of 88.20-88.80

* The pound depreciated by 0.35% yesterday amid concerns over a global economic slowdown. The IMF director warned that a third of the world will fall into recession in 2023. The pound ended 2022 on a negative note mainly on the back of a gloomy economic outlook, a strong dollar and political uncertainty

* The pound is expected to trade with negative a bias on expectation of disappointing economic data from Britain. However, sharp downside may be cushioned on weakness in the dollar and rise in risk appetite in global markets. GBPUSD is likely to fall till 1.1990 level as long as it sustains below 1.2080 level. GBPINR (January) is expected to trade in a range of 99.60-100.10

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