Daily Rupee call: INR can be volatile today

Akhil Nallamuthu BL Research Bureau | Updated on February 05, 2021

It was a flat day for the rupee (INR) as it closed last session almost at the same level of Wednesday i.e. 72.96 against the dollar (USD). Thus, it continues to trade around the 73.00 mark and is struggling to take a direction.

The monetary policy committee (MPC) of the Reserve Bank of India (RBI) has left the repo rate unchanged today along with the expected lines. So, this might not have a significant impact on the exchange rate of USDINR.

Today, INR has opened at 72.98, without much deviation from Thursday’s closing level. If it appreciates from here, it can find hurdles at 72.80, above which 72.70 can be a hindrance. But if the domestic currency weakens and slips below 73.00, it can find support at 73.15. Subsequent support is at 73.25.

The foreign portfolio investors (FPIs) continue to pump in money into the domestic market. The net inflow on Thursday stood at ₹1,936 crore and hence, for the week so far, they have made net investments worth ₹12,133 crore. This has been saving rupee from firming dollar. If the inflows remain strong, INR can stay steady against the greenback.

Dollar index

Extending the rally, the dollar index advanced and closed at 91.53 as against prior session’s close of 91.17, thereby gaining about 0.4 per cent. The uptrend looks strong and the crossing of 21-day moving average (DMA) over the 50-DMA is an indication of the medium-term trend becoming positive. Now that the resistance at 91.50 is taken out, the dollar index will most likely touch 92.00 and this can put some downward pressure on the rupee.

Trade strategy

The rupee is lacking direction as the foreign inflows in to the domestic market and dollar strengthening has been balancing out each other. Going by this, the Indian currency can be expected to be trade flat today. But communication about liquidity measure from the RBI can trigger volatility and so, traders should tread carefully today.

Supports: 73.00 and 73.15

Resistances: 72.80 and 72.70

Published on February 05, 2021

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