The rupee depreciated nearly 0.4 per cent on Tuesday to close at 83.04 against the dollar (USD), thus closing marginally below the key 83-level. The strength of the greenback is weighing on the Indian currency despite considerable foreign inflows.

According to the NSDL (National Securities Depository Limited) data, the net FPI (Foreign Portfolio Investors) inflows over the past week have been $820 million. Given the higher probability of a bounce in the Indian equity market, foreign inflows are likely to be steady.

Nevertheless, the rally in the dollar is likely to continue, and crude oil prices too are hardening. So, these factors might weigh on the local currency. The charts, too, are hinting at a further fall. Below is the technical analysis of the USDINR currency pair.

Chart

The rupee, which has largely been flat over the past week, witnessed a sharp fall on Tuesday. This has brought back bearish interest. Therefore, going ahead, we might see a minor rally from the current level of 83.04 to 82.85, and then the downtrend can resume..

There is potential for the rupee to depreciate to 83.50 in the near term. A breach of this level will open the door for a fall to 84. On the other hand, if the rupee appreciates and surpasses the resistance at 82.85, it might rise to 82.50.

The dollar index (DXY) saw a corrective decline last week. However, it found support at 103 and bounced off this level. On Tuesday, it moved above the hurdle at 104.30, and the price action indicates further strengthening of the DXY, potentially to 105.70. If such an upmove materialises, the rupee could slip to 83.50.

Outlook

As the Indian currency has fallen below the 83 level again, the chances for further decline appear high. We expect the rupee to touch 83.50 in the short term.

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