Indian rupee tumbled below 63 for the first time since January. The currency fell to a low of 63.54 on Tuesday, lowest since September 2013. Rupee had opened this week on a weak note and fell over a per cent on Monday, its largest single day fall since August. The trade balance data that was released after the market close on Monday was a major trigger that has pulled the rupee below 63 on Tuesday.

Deficit drags the rupee

India’s trade deficit widened to $16.86 billion in November from $13.36 billion in October and $9.57 billion for the same period in the last year. A surge in gold imports to $5.6 billion in November from just $835.8 million the year earlier took the overall imports higher by 26.8 per cent (year-on-year) to $42.82 billion. Comparatively, the rise in exports was minimal. In November, Indian exports were up 7.3 per cent from the pervious year to $25.96 billion. The November trade deficit data is increasing the concern of the Current Account Deficit (CAD) widening further. Data release from the Reserve Bank of India last week showed that the CAD for the July-September quarter has widened to $10.08 billion from $7.8 billion in the previous quarter and $5.2 billion for the same quarter last year.

Technical levels

The US Federal Reserve’s two day meeting begins today and the market would be waiting to see if any hint is given on its rate hike plan. The outcome of this meeting on Wednesday would be a key in deciding the rupee’s movement for the rest of the week.

Rupee has an important support at 63.59 – the 50 per cent Fibonacci retracement level. Given the sharp fall in a very short span of time, the currency could now pause at this support at least for the next few sessions until the outcome of the Federal Reserve meeting is known.

A break below 63.59 will take the rupee further lower to 64 or even 64.83 – the 61.8 per cent Fibonacci retracement level. On the other hand, a sustained reversal from 63.59 will see the rupee strengthening towards 63 and 62.5.

IT stocks gain

Weak rupee is pushing Indian IT stocks higher. While the Indian benchmark indices are down over a per cent today, the BSE-IT index is in the green today and is up 2.2 per cent. HCL Technologies is up 4.7 per cent and TCS is up 3.9 per cent today.

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