Rupee may trade in 71.00-72.20 range this week

By Gaurang Somaiya

Rupee consolidated in a broad range of 70.70 and 71.40 for the second successive week despite volatility in global crude oil prices and as the dollar rebounded sharply against the US dollar.

On the domestic front, data showed India’s inflation grew at 2.19% compared to 2.33% in the previous month raising hopes of a rate cut by RBI in the upcoming policy meeting scheduled in February. Recent growth projection released by the CSO could also prompt the central bank for consecutive rate cuts in the coming meetings.


Trade deficit was impressive but failed to have any major impact on the currency. This week, on the domestic front, no major economic data is expected to be released but clarity on the ongoing talk between US and China on trade could give direction to the currency. For the week, the USD-INR pair is expected to quote in the range of 71.00 and 72.20 (Spot)

Euro was weighed down against the US dollar and further sell-off in the currency came in after reports that US may be considering lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback during trade discussions scheduled for Jan. 30.

In December, US and China agreed to a 90-day truce in a trade war that has disrupted the flow of hundreds of billions of dollars of goods. Euro was weighed down also after lawmakers rejected the Brexit withdrawal deal painstakingly negotiated between Prime Minister Theresa May and her European counterparts. This week, from the Euro zone, preliminary manufacturing PMI and ECB policy meeting will be important to watch.

Market participants will be awaiting for cues from the ECB governor on what could be the impact of the Brexit on the Euro zone economy as a whole.

Prior to the Parliament Brexit vote, pound was weighed down against the US dollar but latter in the week the currency rallied sharply after UK Prime Minister survived a no-confidence vote.

The UK Prime Minister, May, said her government would continue to work to deliver on Brexit and said it was their duty to find a way forward that was approved by the House. Inflation in the UK also contracted at a slower pace in December compared to the previous month thereby keeping losses restricted for the currency.

From UK, employment number is the only important data to watch but uncertainty related to Brexit will continue to keep market participants on the edge. This week, GBPUSD pair is expected to quote in the range of 1.2730 and 1.3050.

(Gaurang Somaiya is currency analyst at MOFSL)