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The Indian rupee is continuing to get beaten down. Though the currency opened the truncated week on a positive note, it failed to retain the momentum. It made a high of 66.52 but failed to sustain higher.
It had reversed sharply lower from those levels, breaking below the crucial psychological level of 67. It finally tumbled to a low of 67.18 before closing at 67.14 on Monday, down 0.7 per cent for the week.
Dollar strengthens
The US dollar index surging over a per cent in the past week kept the rupee under pressure through the week. The dollar index breached the key resistance level of 92 and surged to a high of 92.9. Though it has come off slightly from this high, the outlook remains bullish.
A rally to 93.3 and 93.5 looks likely in the coming days. Such an upmove in the dollar index may drag the rupee further lower in the short term.
The crude factor
The second factor that has been keeping the rupee under pressure in recent times is the strong rally in crude oil prices.
US crude oil has risen above $70 per barrel for the first time since November 2014. It is currently trading at $70.4 per barrel.
Technically, oil is on a strong footing. With strong support in the $67-64 region, the current rally in US crude oil prices has the potential to target $76 in the coming weeks. Brent crude, on the other hand, has risen above $75 per barrel and can target $81 and $82. Such a rally in oil prices will increase the possibility of the rupee tumbling below 68 in the coming weeks.
Foreign portfolio investors (FPIs) continued their selling spree in the Indian debt segment for the third consecutive week. They sold $514 million in the past week and have offloaded over $2.6 billion over the last three weeks. As long as the FPIs remain net sellers of Indian debt, the rupee will continue to trade under pressure.
Rupee outlook
Rupee has decisively declined below the crucial 66.9-67 support zone. This zone (67-66.9) will now act as a strong resistance for the currency. As long as it remains below 67, a fall to 67.4 looks likely in the short term.
If the rupee manages to recover from 67.4, an intermediate relief rally to 67 is possible. But a strong fall below 67.4 will bring in more pressure to the currency. In such a scenario, the possibility of the rupee falling to 68.3 over the medium term will increase.
Rupee will get a breather only if it manages to break 66.9. Such a break can take it higher to 66.7 or 66.5 in the short term. But such an upmove looks less probable at the moment.
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