Money & Banking

Rupee continues to move within a narrow range

Gurumurthy K | Updated on January 16, 2018 Published on October 26, 2016

rupee eps

The currency has been unaffected by the sharp surge in the dollar index

The rupee has been stuck in a narrow range of 66.4-67 for the fifth consecutive week. It touched a low of 66.94 on Friday and continued to hover at around that level for most part of the week before closing at 66.83 on Wednesday.

No major macroeconomic data was released last week to trigger sharp movements in the rupee. Interestingly though, the rupee has also shrugged off global jitters in recent times.

Major currencies like the euro and the pound have been tumbling against the dollar since the beginning of this month. The euro has fallen 3.3 per cent while the pound has plummeted over 5 per cent so far this month.

This, in turn, has taken the dollar index higher by 3 per cent. The index, which is currently trading at around 98.5, is likely to extend its rise to 99 or even 100 in the coming days.

However, the rupee has remained stable this month. Volatility may increase as the markets eye the next US Federal Reserve meeting due on Wednesday (November 2).

On the domestic front, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) on Tuesday (November 1) is the only key macro data due for release next week.

Rupee outlook

Outlook on the rupee remains unchanged as the currency is still stuck within its sideways range. A breakout on either side of 66.4 or 67 will decide the next trend for it.

If the rupee falls below 67, it can test the next support at 67.2. A decisive break below 67.2 will increase the possibility of it falling to 68 or even lower levels.

On the other hand, if the rupee manages to strengthen beyond 66.4 it can test 66.3 initially. Further break above 66.3 can take it higher to 66.

As reiterated in the past few weeks, 66 is a key medium-term trend-deciding level for the rupee.

If the rupee fails to strengthen beyond 66 and reverses lower subsequently, it can remain range-bound between 66 and 68 for some time. But if it breaks above 66, there is a strong likelihood of it strengthening to 65 thereafter.

Published on October 26, 2016
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