Live: Indian Rupee Ends Little Changed At 75.67 Against U.S. Dollar

The escalation in Russia-Ukraine tension has hastened the rupee depreciation, with the currency weakening to near the 77/$-mark. This move has factored in elevated crude oil prices, normalisation of monetary policy by the U.S. Federal Reserve, a global growth slowdown, and geopolitical tensions, said IDFC FIRST Bank Economics Research in a note.

The research house is not ruling out further depreciation. The dollar-rupee trading range is expected between 75.50 and 78.00 in 2022, it said.

"We see space for the dollar-rupee to rise to 78 by the first half of FY23, driven by a more hawkish Fed as the inflation situation in the U.S. worsens with an escalation in global commodity prices," it said.

However "crude oil prices could surprise either way, depending on supply issues from Russia and the tenure of the ongoing geopolitical tensions," the report added.

The RBI is unlikely to exceed market expectations on interest rate hikes, as growth recovery is showing signs of loss of momentum. Instead, rupee depreciation pressures will be limited by adequate forex reserves and lesser dependence on FPI flows, the report said.

The rupee opened at the same level as Friday's close as Indian equity markets remained upbeat and oil prices remained stable. The dollar index has jumped back to levels above 99.

With U.S. Inflation running at a 40-year-high, there is no room left for the U.S. Federal Reserve to delay its rate hike cycle. The increased cost of buying energy and other raw materials could raise inflation levels further, which had led analysts to protect rate hikes of 1.75% in 2022, Imran Kazi, VP, Mecklai Financial, said in a note.

Locally, inflation data for February will be released on Monday. Markets will focus on whether the Reserve Bank of India is comfortable staying on hold even as global central banks raise rates.

From the way things are placed at the moment, the rupee looks set for a re-test of the all-time low and a breach of the 77 mark, Kazi said.

The Indian rupee closed 0.38% lower at 76.59 against the U.S. dollar on Friday.

India's stock benchmarks snapped a four-week losing streak, aided by gains in healthcare, media and information technology stocks. The Sensex and Nifty rose for four consecutive sessions to Friday, the longest winning streak in nearly two months.

Markets are keeping an eye on global central banks along with the Russia-Ukraine conflict. The U.S. Federal Reserve is to meet on March 15-16, as 40-year high inflation levels lay the ground for possible rate hikes.

Oil posts its first weekly loss since Russia invaded Ukraine. Prices whipsawed over the five-day period due to an array of news that included a U.S. ban of Russian crude imports and the U.K.’s planning to gradually phase out of them.