The rupee threatened to spin out of control last week as it crossed the 54 level against the dollar. But a slew of measures initiated by the RBI, including withdrawing the facility to cancel and rebook forward contracts, restricting the limit for open positions that banks can hold in rupee forwards and de-regulating interest rate on NRE and NRO accounts, stemmed the decline and took the currency to 52.2. Political instability in North Korea and return of volatility in equity market have made the rupee turn choppy again this week.

The dollar has been strengthening against the euro as the threat of rating downgrades of European nations and banks continues. The ECB President Mr Mario Draghi's stance that the ECB will not resort to aggressive bond purchases also applied pressure on the European currency unit. This helped the dollar index stay around the 80 level. Target on a move above 80 is 82.9 for the dollar index. Medium-term view will turn positive only on close above 83.

Dollar-rupee outlook : The rupee went on to record a new life-time low at 54.3 on December 15 before reversing higher. The Indian currency however halted at the short-term resistance at 52.1. Sideways movement in the range between 52.1 and 54.3 will imply the propensity to move below 54.3 in the weeks ahead.

Resistances above 52.1 are at 51.4 and 50.8. As explained last week, move below the recent low will take the rupee towards the medium-term target of 55.3.

USD-INR futures contract moved above our second target to 54.5 before reversing lower. Immediate support for the contract is at 52.6. If this level is breached, decline to 51.4 is possible.

Short-term resistances are at 53.4 and 53.6. Traders can initiate fresh shorts on reversal from either of these levels.

EUR-INR futures reversed from the resistance at 70.8 to decline to 68.2 on Friday. Short-term resistances are at 70.1 and 71.3. Traders can initiate fresh shorts on failure to move above the first resistance.

Downwards targets are 68.2 and 67.7.

GBP-INR futures contract too recorded the low of 81.3 before reversing higher. Target on a move above 84.2 is 85.3. Short-term supports are at 81.3 and 80.2. Medium-term view will be roiled only on close below 79.1.

JPY-INR futures are currently moving lower after recording a peak of 69.7. Immediate support is at 66.7 and fresh short positions are advised only on close below this level. Subsequent supports are at 65.7 and 64.8.

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