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Volatility in stock markets and continued outflow of foreign institutional investor funds made the rupee hover around the 52-mark against the greenback over the past week. Selling of dollars by exporters and select banks prevented a slide below 52.

Dollar remained strong against other currencies despite the sharp rebound in US equities on Tuesday. 26 per cent contraction in Chinese exports compared with the same month last year brought risk aversion back to currency markets causing dollar to appreciate. Dollar index rose close to its 3-year high at 89.

The Indian currency unit moved in a very narrow range between 51 and 52 over the last five sessions. The medium term outlook for the currency is negative and this sideways move appears to be a halt before another leg of the down-move unfolds. The medium term targets for the currency are 52.7 and 53.3.

But as explained in this column last week, there is a strong support in the band between 52.5 and 53.5 which can arrest this decline. Key medium term resistance will be in the zone between 50 and 50.5. A close above this range is needed to mitigate the negative medium term view.

The short-term trend in rupee is sideways. Short-term range for the currency is between 51 and 53. It is currently testing the support around 52. Once this level is breached, the next downward targets would be 52.2 and then 52.7.

The resistance around 51 is likely to arrest any rallies in the near term. If the rally continues beyond 51, the next hurdle would be at 50.5.

Supports – 52.2, 52.7, 53.3

Resistances – 51.2, 50.9, 50.5

Lokeshwarri S. K.

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