Rupee To Remain Under Pressure; Could Hit 77/$ Levels

Rupee in trade on Wednesday (March 2, 2022) last traded lower at 75.736 per US dollar, while at day's low it hit levels of 76.2 against the greenback.

Rupee To Remain Under Pressure; Could Hit 77/$ Levels

The domestic rupee has been under pressure owing to the crude oil price which hit 8-year high as brent crude topped levels of $111 per barrel, gaining 5.75%. India imports most of its crude requirement thus pushing up domestic inflation as well as widening the country's current account deficit or CAD.

On the other hand, 10-year bond yield also edged higher by 0.59% to 6.81%.

Regardless of the sanctions, Russia's defence minister said that the country's Ukraine operations will continue. Fears of supply disruptions from Russia, one of the largest energy product exporters, has pushed crude higher.

Also, the dollar has been seen marching higher on account of its increased appeal as a safe-haven current as there is a loss of risk appetite amid the ongoing invasion of Ukraine by Russia. Meanwhile, the U.S. treasury yields continued to move lower as the chances of Fed rate hikes remained dismal in the current situation, said Imran Kazi, vice-president at Mecklai Financial.

Analysts expect the rupee to remain under pressure and could hurtle towards 77 levels. "Investor sentiments were choked after the energy supply fears pushed brent oil prices to $110 barrel. Equities were severely impacted due to rising input commodity costs while the US dollar gained support from the safe-haven demand. Euro, Pound, Japanese Yen all majorly lost against the rising US dollar while the emerging market forex remains at larger risk amid the fear of the FII outflows. The shift in global growth outlook as a result of the worsening conflict has trimmed the expectations of aggressive rate hikes from the Federal Reserve. The Fed's monetary meeting decision on 16-17th March will be the toughest for the central bank to communicate as it tries to balance inflation and growth," said CR Forex Advisors.

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