The Indian rupee remained range-bound, but was volatile in the past week. The currency fell to a low of 66.86 on Thursday and recovered from there to close at 66.60 on Friday, up 0.17 per cent for the week. The markets were closed on Monday on account of a public holiday. Strong foreign money inflows into the Indian equity markets supported the currency. The Foreign Portfolio Investors (FPIs) bought $1.3 billion in the equity segment in the past week. The debt segment attracted an inflow of $152 million.

Volatility is well on the cards, as this week is packed with series of key events. On the domestic front, both the Wholesale Price Index (WPI) and the Consumer Price Index (CPI) inflation numbers are due today.

It will be followed by the much awaited US Federal Reserve meeting on Wednesday. A rate hike is widely expected which is already getting factored in the market. The market is also keenly awaiting cues from the US Fed Chair Janet Yellen’s address to gauge future rate actions. A strong indication of aggressive rate hikes during the year, can boost the dollar. In such a scenario, the Indian rupee may come under pressure and weaken going forward.

The dollar index (101.30) made a high of 102.25 on Thursday and has come-off sharply from there.

The index is still facing strong resistance to breach above 102. Support is at 100.5 and the index may remain range bound between 100.5 and 102.25 at least until the outcome of the Fed meet is known on Wednesday.

A breakout on either side of 100.5 or 102.25 will then decide the next trend. A strong break below 100.5 can drag it to 100 and 99.5. On the other hand, if the index manages to surpass 102.25 decisively, a rally to 103 or even 103.5 can be seen thereafter.

On the charts, the near-term view continues to remain positive for the rupee as the support in the 66.90-67 zone is holding very well.

Rupee outlook

The currency needs to break below 67 decisively to lose momentum. Such a break can take it lower to 67.20 and 67.50 thereafter. Can the outcome of the US Federal Reserve meet trigger such a fall? Only time will tell.

Immediate resistance is around 66.50, a break above which can take the rupee higher to 66.35 and 66.30. Further break above 66.30 can see the rupee strengthening to 66.10 and 66.

The Indian rupee strengthening beyond 66 looks less probable at the moment. As such, a reversal from 66 will keep the broader 66-68.85 range intact which has been in place for more than a year now. Such a reversal from 66 will then increase the likelihood of the rupee falling to 67 and 68 levels over the medium-term.

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