Daily rupee call: Take a cautious approach to intra-day

Akhil Nallamuthu | Updated on May 11, 2020 Published on May 11, 2020

The rupee (INR) lost a little over half a per cent last week against the dollar (USD). The domestic currency closed at 75.55 versus the preceding week’s close of 75.1.

Today, the Indian currency has opened at 75.58. A rally from here can be obstructed by the resistance at 75.3, above which the hurdle is at 75.15. But if the local currency slips below 75.6, it can depreciate to 75.8 and then 76. Hence, 75.6 holds the key.

The net flow from Foreign Portfolio Investments (FPI) have turned positive for the month. This is because of a bulk deal in one particular security and so this may not indicate an overall change in the FPI trend. The net inflows for the current month are now at ₹15,940 crore (equity and debt combined). Nevertheless, if more buying follows, it can keep the rupee afloat.

Foreign reserves

The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday showed that foreign reserves increased slightly between April 24 and May 1. According to the report, total reserves increased by $1.6 billion i.e. it increased to $481.1 billion from $479.5 billion. Foreign Currency Assets (FCA), the largest component of the reserves, has gone up by around $1.8 billion to $443.3 billion from $441.5 billion. On the contrary, the value of gold holding is marginally down at about $32.3 billion, compared to the previous week’s $32.9 billion. Thus, the RBI continues to retain its buffer to combat unexpected volatility.

Dollar index

Last week, the dollar index ended flattish at 99.73 versus its previous week’s close of 99.08. Thus, it continues to fluctuate within the range between 98.8 and 100.9. The index currently lacks trend and unless it breaches either 98.8 or 100.9, the next leg of trend will remain uncertain.

Trade strategy

The rupee is moving around an important level of 75.6 and until it does so, the next swing of trend will be unclear. Hence, traders need to be cautious and fresh positions are not recommended until a clear trend emerges.

Supports: 75.8 and 76

Resistances: 75.3 and 75.15

Published on May 11, 2020

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