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The ferocious declines in stock prices yanked the rupee past the 50-threshold briefly, but the central bank intervention has thus far ensured that the rupee does not stay below that mark for long. Meanwhile pandemonium continues in other currencies. Yen strengthened to levels last recorded in 1995 on carry-trade unwinding while Euro and Pound slid on fears of a rate cut by the respective central banks. This resulted in strengthening the dollar. The dollar index, traded on the Intercontinental Exchange, has risen to 88. Expectation of policy rate cut by the Federal Reserve is making the currency pause over the last two trading sessions. The next resistance band for this index lies between 90 and 92.5. A downward reversal is possible from this zone.

Though there was a great deal of consternation on the rupee testing the 50 mark, it is important only from a psychological perspective. The support at 49 was the key support for the long-term and the Indian currency has now recorded two weekly closes below this level. As long as the currency remains below this level, the possibility of a decline towards 53.4 remains open.

Conversely, if the currency strengthens past 49, it can rally towards 47.5 and 47. A weekly close above 47 is needed to turn the medium-term view positive again.

Strength in stock markets helped the rupee appreciate towards 49.6 on Wednesday. This rally can continue to take the rupee higher 49.2 or 48.6. We remain circumspect as long as the rupee remains below 48.6. Appreciation past this level would mean that the rally this time can sustain to pull the currency higher to 47.5 or 47.

The zone between 50 and 50.3 would remain an important support. But once this is breached, the decline can accelerate to pull the currency towards 50.6 and then 51.3.

Supports – 50.3, 50.6, 51.3

Resistances – 49.2, 48.6, 47.5

S.K. Lokkeswari

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