Money & Banking

Rupee likely to appreciate today

Akhil Nallamuthu BL Research Bureau | Updated on October 01, 2020

The rupee (INR) ended yesterday’s session marginally higher at 73.77 against the dollar (USD). However, the local currency remains below 73.7 – an important level. But today it has opened with a gap-up at 73.59. If the positive momentum sustains, INR can advance to 73.4 and 73.3. Resistance above that level is at 73.15. But it weakens, it can probably find support at 73.7 and 73.85.

Continuing with the current week’s trend, Foreign Portfolio Investors (FPI) sold domestic assets yesterday as well. The net outflow on Wednesday was recorded at ₹712 crore (equity and debt combined), taking the weekly tally to nearly ₹2,200 crore. Further selling by the FPIs can weigh on the domestic currency.

Balance of Payments

Yesterday, the Reserve Bank of India (RBI) released the Balance of Payments (BoP) data for the first quarter of 2020-21. According to the statement, the Current Account Balance (CAB) marked a surplus of considerable $19.8 billion in Q1-FY21, compared to a deficit of $15 billion in Q1 of 2019-20. In Q4 of 2019-20, the surplus stood at $0.6 billion. Even though better BoP number is good for the rupee, it is recorded against the backdrop of sluggish economy and so one should be cautious about it.

Dollar index

Bears seem to be gaining traction as the dollar index has been on a decline for the past few trading sessions. It has closed in the red for the past three trading sessions, and has fallen below the key level of 94, indicating a considerable downward momentum. Currently trading at 93.7, the index might decline to 93.5 – its 21-day moving average. Subsequent support levels are at 93.25 and 93.

Also read Rupee up 11 paise against US dollar

Trade strategy

The rupee opened on the front foot today and is now trading above the support at 73.7. The local currency is likely to gain from here, and so traders can buy INR for intraday with stop-loss at 73.7.

Supports: 73.7 and 73.85

Resistances: 73.4 and 73.3

Published on October 01, 2020

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