The Hindu Business Line : Rupee to decline to 47

Lacklustre movement in the domestic stock market coupled with strength in US dollar made the rupee decline to 46.8 against the greenback. Foreign institutions pulling out funds from equities over the last three sessions and month-end demand for dollars from oil importers were other factors exerting downward pressure on the local currency unit.

Dollar strengthened against major currencies towards the end of last week on safe haven demand and growing concerns on global banking system resulting in money flowing back into dollar assets. Short-covering too was partly responsible for sending dollar index to 76.5 on Friday. But the down-move in dollar index can resume after a halt in the 75 to 77 region for a few weeks.

One-month view

Rupee reversed from the strong resistance around 46 once more forming a peak at 45.7 on November 17. As indicated in our previous column, the currency is likely to be shackled within a narrow range between 45 and 48 for a few more weeks. A close below 48 will turn the medium term view negative while a close above 45 is needed to indicate an impending rally towards 44.

The intermediate term trend is up since March and sideways consolidation would be construed a halt before the rally continues. The positive intermediate term view will be altered only on a strong close below 48.

Five-day view

The short-term trend in rupee is down and the currency can decline to 46.7, 47 or 47.4 in the near term. Declines will get strong support around 47.5 where the 200-day moving average is positioned. Resistances in the days ahead would be at 46.1 and 45.7.

Supports – 46.7, 47, 47.4

Resistances – 46.1, 45.7, 45.5

Lokeshwarri S.K.

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