The dollar hit a five-month high against a basket of currencies on Friday due to fears of an escalation of conflict in West Asia after Iran launched a drone attack on Israel.The attacks came at a time when the dollar had already been gaining ground after indications that the US Fed was unlikely to cut rates in 2024.
“Brent has crossed $92 and may even move toward $100. The dollar index is above 106 and the rupee is trading at 83.56 in the NDF (non-deliverable forwards) market. We can expect a week of high volatility starting on Monday,” said K N Dey, a foreign exchange consultant who advises businesses on forex strategy.
Riya Singh, an analyst with Emkay Global, said, “The robust performance of the dollar index and rising US treasury yields continue to exert pressure on the rupee, which ended the week on a depreciative note against the strong greenback. Expectations of delayed Fed rate cuts and elevated crude oil prices further contribute to the rupee’s challenges. However, RBI intervention and selling by exporters is expected to limit rupee depreciation to levels around 83.50 to 83.65.”
According to Singh, the rupee is expected to oscillate within the range of 83.20 to 83.55 in the coming week, subject to market dynamics and central bank actions.