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The nascent rupee appreciation that began last week was terminated by the terror attacks in Mumbai. There was a sharp downward reversal when the forex markets re-opened on November 28 after a one-day break caused by fears of accelerated fund pull-out by foreign institutional investors (FIIs). The Indian currency went on to record a new trough at 50.58 on Tuesday.

Official declaration of recession in the US hiked risk-aversion, leading to the dollar strengthening against most major currencies, with the exception of Yen. The Dollar index traded on Intercontinental Exchange recovered from the trough at 84.6 and moved higher. The intermediate trend on this index will stay positive as long as it holds above 84.

There is no change in our medium-term view for the Indian currency. There is a strong support between 50 and 51 and there would be a struggle to penetrate this level. The likely medium-term range for the currency remains between 46.4 and 50.5. But we continue to believe that the lower boundary can be penetrated as the rupee attempts to form a new low below 52.

This bearish view will be mitigated only on a close above 46.4.

A short term down trend is in progress since the peak formed on November 5. The resistances levels for the next 5 days would be at 49 and 48.2. If the rupee remains below 49, it will imply the near term trend remains weak.

Strong support continues to be around 50.5. Rupee can fluctuate in the band between 49 and 50.5 for a few more sessions. If the lower boundary is breached, there will be a sharp fall to 50.9 or 51.8

Supports – 50.5, 50.9, 51.8

Resistances – 49.1, 48.2, 46.7

Lokeshwarri S. K.

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