Indian Rupee Closes 0.32% Lower At 76.16/$

The rupee ended the day at 76.16 against the U.S. dollar, depreciating 0.32% from Thursday's close of 75.91.

Rupee May Depreciate To 77/$: Deutsche Bank

In a note dated March 4, 2022, Deutsche Bank chief India economist Kaushik Das said that oil prices may settle higher than previously believed.

"Recent developments have led us to revise our Brent crude oil forecast to $95/barrel level next quarter, before falling to $85/ barrel at the end of this year and to $75/barrel at year-end 2023."

Based on these oil forecasts, Deutsche Bank revised its India’s FY23 current account deficit forecast to 2.7% of GDP, or $95 billion in absolute terms. "This will likely push the overall balance of payments into a slight deficit of $5 billion in FY23," Das wrote.

A higher current account deficit is likely to put pressure on the rupee. "The rupee has already depreciated close to 76/$ levels and could easily push towards the 77/$, which will then test the resolve of the RBI, to restrict further depreciation by way of selling dollar," said the note.

The rupee will likely remain weak amid the grim situation, said Imran Kazi, vice president at Mecklai Financial. The RBI support was visible for the rupee around 75.75 levels over the past two days and should continue going forward, Kazi said.

Any dip of 20-30 paise should be utilised to cover small portions of imports payable up to a couple of months, Kazi said. "Exports up to 6-9 months should be hedged significantly in the 76-76.25 range, for a longer tenor 76.25-76.75 range can be targeted with a risk limit below 75.70."

Nuclear Plant Fire, Dollar Strength Pushing Rupee Lower

As the Russian forces continue the onslaught in Ukraine, a fire has broken out at a nuclear plant which accounts for 20% of the Ukrainian electricity supply. The fire has not reached the essential part of the reactor yet but risks of nuclear leakage remain.

This, according to IFA Global Research, is adding to nervousness in the market. The dollar strengthened amid a cautious risk tone, the currency research house said in an emailed statement.

These factors, along with the elevated crude oil prices, will continue to weigh on rupee sentiment.

"RBI has been offering dollars through nationalised banks and has been intervening on exchanges as well. However, the dollar bids have been quite intense," IFA said.

Rupee depreciated 0.23% at 76.08 a dollar as the Russia-Ukraine crisis worsens and crude oil prices remain elevated.

The domestic currency breached the 76/$ level for the first time since Dec. 20, 2021.

Crude oil prices are headed towards their biggest weekly jump in two years. Supply-side concerns for crude persist amid the ongoing geopolitical tensions. Global equity markets, too, have been roiled.