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The rupee strengthened further against the dollar to move above the 44.5 mark. Rally in equity prices induced by foreign institutional investors going on a buying spree spurred the Indian currency. These investors pumped in close to Rs 6,373 crore in the last five sessions. Exporters selling dollars also helped the rupee firm up.
Dollar gained against other currencies on Tuesday on US Fed chief, Dr Ben Bernanke's comment that he is keeping a close watch on inflation, leading to expectation that interest rates could be hiked soon. The dollar index is currently moving sideways between 75.6 and 76.6. We maintain that next support is at 75.2. Resistances for the near-term are at 77.6 and 79.4.
Dollar-Rupee outlook
The support at 44.9 indicated in this column last week supported the Indian currency and it reversed higher to move to the high of 44.4 on Tuesday. Immediate targets for the currency are 44.27 and 44.20.
It needs to be remembered that the currency faces long-term resistance in the zone around 44.2 that occurs at 61.8 per cent (Fibonacci) retracement of the decline from January 2008 peak of 39.2 to the March 2009 trough of 52.2. Strong close above this level can take the contract towards 42 or even lower over the long-term.
Weekly close above 47.1 is needed to mar the positive long-term view for rupee against dollar.
USD-INR futures
USD-INR futures moved in line with our expectation, reversing lower from the short-term peak of 45.03 to decline to 44.5 on Tuesday. Subsequent targets for the contract are 44.3 and 44.17. Traders can hold their short positions with stop at 44.8. Subsequent resistances are at 45.03 and 45.16.
EUR-INR futures
EUR-INR futures moved to the peak of 63.6 before turning weak. Immediate target for this down-move is 62.9. Breach of this level will take the contract to 62.4 or 62 over the ensuing weeks.
Traders can hold their short positions with stop at 63.6. Move above this level will give the next target at 64.13.
GBP-INR futures
GBP-INR futures rallied to the peak of 72.4 on Tuesday but it turned very volatile thereafter. Immediate resistance for the contract is at 72.7. Failure to move beyond this level can keep the contract in the range between 71.5 and 72.7 for few more sessions. Target on a breach of the lower boundary is 71.3.
JPY-INR futures
JPY-INR futures breached the support around 54 to fall to 52.7 on Tuesday. Subsequent targets are 51.4 and 50.2. Traders can play short as long as the contract trades below 54.1.
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