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Turbulence in the equity market caused by soaring crude prices made the rupee decline to 45.5 against the dollar last week. The Union Budget however managed to reverse this downtrend as the proposal to increase FII limit for investment in corporate infrastructure bonds and allowing foreign individuals to invest in registered mutual funds was viewed as conducive to the Indian currency. The exuberant post-Budget rally in equities on Tuesday provided the impetus to take the currency above the 45 mark.
Dollar continued to lose ground and the dollar index traded on the Intercontinental Exchange recorded a low of 76.7 on Tuesday. If the index sustains below 77, it can go on to the November low of 75.7. Short-term resistances for the index are at 78.2 and 79.
Dollar-Rupee outlook
Rupee spot reversed from the low of 45.5 to rally to 44.9 on Tuesday. The currency faces immediate resistance around 45 and a strong move above will take it to 44.8. The currency faces strong resistance in the zone between 44.6 and 44.8. The medium-term view will turn positive only if the currency records a strong close above 44.6. Next target is 44. Near-term supports would be at 45.3 and 45.5. Close below 45.5 is needed to mar the positive medium-term view.
USD-INR futures
USD-INR futures moved to the high of 45.7 before reversing lower. Immediate targets for the contract are 45 and 44.9. The entire zone between 44.8 and 45 is a strong medium-term support zone and traders should square their shorts if the contract rebounds from this level. Short-term resistances would be available at 45.5 and 45.7. Traders can hold their shorts as long as the contract trades below the first resistance.
EUR-INR futures
EUR-INR futures broke above the resistance at 62 on February 24 and then went on to record the peak of 63.2 the next day. The contract faces strong resistance between 63 and 63.5. Since the contract is reversing from this zone, it can now decline to 62 or 61.3 in the days ahead. Traders can hold their short positions with stop at 63.3.
BL Research Bureau
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