Over the past fortnight, the rupee oscillated between 55.14 and 56.16 against the US dollar to close at 55.47, almost unchanged from two weeks ago. Expectations of concrete action on the policy front after the Presidential election supported the currency in some sessions. On the other hand, weighing on the currency was the increasing spectre of a poor monsoon. Hopes of a rate cut by the RBI to boost growth came undone, with the central bank giving priority to inflation control. The RBI relaxed some restrictions regarding retention of export earnings in foreign currency. While this is positive for exporters, it may put some pressure on the rupee. Meanwhile, crude oil price has inched upwards and Brent trades at $106 a barrel. This is bad news for the currency.
Against the euro, the rupee lost 0.57 per cent over the last fortnight and currently trades at 68.28. Despite continuing debt troubles, the euro was aided by positive statements from the European Central Bank. This helped the currency snap its losing streak and gain 0.13 per cent against the dollar over the last two weeks. A euro now yields 1.23 dollars. The Dollar Index meanwhile lost 0.44 per cent and currently trades at 82.7.
Dollar-rupee: Rupee attempted to strengthen against the dollar ahead of the RBI monetary policy. But the rally halted at 55.19 and the currency is moving sideways in a narrow range since then. Short-term supports for the currency are at 56.1 and 56.6. It is possible that the currency reverses higher from these levels. But rallies are expected to be arrested at 54.2 or 54 in the weeks ahead. In other words, rupee could spend few weeks vacillating in the band between 54 and 56.5.
The medium-term view for the currency continues to be down. Strong close above 54 is required to reverse this view. Else the possibility of a decline below 57.3 will remain open.
Targets on close above 54 are 53 and then 52.
USD-INR futures: This contract is in a short-term uptrend from the low of 54.3 recorded on July 19. Short-term supports are at 55.4 and 55.1. Short-term traders can hold their longs with stop at 55.1.
Resistances are at 56 and 56.5.