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The rupee (INR) settled nearly 50 paise higher against the dollar (USD) last week as it wrapped up the week at 74.14. With that the year-to-date loss of INR versus USD is about 4 per cent.
Today, the local currency opened at 74.11 and so it remains below the important level of 74. If the rupee depreciates from the current level, it can find support at 74.3. A break below this level can drag it to 74.5. But if INR appreciates and rally above 74, it can find resistance at 73.85. Subsequent resistance is at 73.7.
Big Story | What lies ahead for the rupee?
Strong foreign inflows continue in November and National Securities Depository Limited (NSDL) data show that Foreign Portfolio Investors (FPI) have made net investments of ₹49,426 crore so far. Of this, equity segment amount to ₹44,378 crore. Substantial inflows has been helping the rupee stay afloat against the dollar.
Foreign reserves
The total foreign reserves held by the Reserve Bank of India (RBI) increased by $4.3 billion to $572.8 billion, according to the latest weekly statistical supplement released by the central bank. Foreign Currency Assets (FCA), the largest component of the reserves, was up by $5.5 billion to $530.3 billion. However, the value of gold holding came down by $1.2 billion to $36.3 billion. Nevertheless, the total reserves is at record highs and large foreign reserves holding is positive for the rupee.
Dollar index
The dollar index ended last week marginally lower at 92.4 versus preceding week’s close of 92.75. Nevertheless, the daily chart shows that it has largely been consolidating within 92 and 94 band, and until either of these level are breached, the next leg of trend will remain uncertain. Currently, the index is testing the support of 92 and a break below this level can result in dollar weakening considerably, which can be good of the Indian currency.
Trade strategy
The rupee has opened today’s session on a flat note. It is currently trading around 74.2. Importantly, the local currency is facing a resistance band of 74.2 and 74. On the back of this, traders can take bearish view on the rupee today. Moreover, the risk-reward ratio favours rupee short positions. So, one can short INR for intraday with tight stop-loss.
Supports: 74.3 and 74.5
Resistances: 74.2 and 74
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