Global Investor

Rupee to stay strong

Gurumurthy K | Updated on January 24, 2018 Published on February 08, 2015


But the US jobs data could make the rupee edgy early in the week

The Indian rupee traded in a small price band last week. The currency opened weak, but strengthened immediately. It went from the low of 62.01 on Monday to a high of 61.56 on Wednesday. The later half of the week however saw the rupee losing ground — it closed at 61.70 on Friday, up just 0.27 per cent for the week.

What moved the rupee?

The big event of the week was the RBI meeting. After a surprise rate cut early in January, the RBI decided to keep the repo rates unchanged at 7.75 per cent in its meeting last week.

But the policy meeting had something for the currency market — the RBI has given FPIs more room to hedge. They can now take positions for up to $15 million in USD-INR pair without any underlying exposure. Also in the EUR-INR, GBP-INR and JPY-INR pairs they can take positions for a total of $5 million (all combined), without any underlying. This move is expected to increase the liquidity in the Indian currency market.

equity markets kept the rupee under pressure, continuing inflows from the Foreign Portfolio Investors (FPIs) are keeping the currency’s fall under check. FPIs bought $1.14 billion in the debt and $761.53 million in the equity segment in the past week. strength. HSBC’s Manufacturing and Services Purchasing Managers’ Index (PMI) data released last week was mixed.

What’s ahead?

The market is awaiting important data releases this week. First, the GDP advanced estimates for 2014-15 is due for release today. The impact of the change in calculation methodology and base year revision will be keenly tracked.

Following this, the Index of Industrial Production (IIP) and the Reserve Bank of India’s closely watched Consumer Price Index (CPI) inflation data are due for release in Thursday. The rupee is likely to come under pressure this week from overseas data releases.

The US jobs data that was released after the Indian market hours on Friday triggered a sharp sell-off in risky assets. So the market could open the week on a nervous note today.

Dollar outlook

The dollar index (94.65) was volatile and remained range-bound in the past week. But on the charts, the outlook remains bullish as the 21-day moving average at 93.56 is providing good support and is limiting the downside for the index.

Immediate resistance is at 95 and a strong break above this level can take the index further higher to 95.65, which is the next key resistance level.

The outlook for the dollar index will turn bearish only on a strong break and fall below the 21-day moving average level of 93.56. Such a break could drag the index even lower to 93 and 92.5

Rupee outlook

The rupee is getting support from the psychological level of 62.

The short-term outlook is bullish for the rupee as long it trades above 62. The rupee can strengthen again to 61.5 and 61.35 this week.

Also, the possibility of it strengthening towards 61 in the short-term cannot be ruled out.

The short-term bullish outlook will get negated if the rupee declines below 62. Such a fall could drag it to 62.35 immediately. It will also increase the danger of revisiting 63 or even lower levels. But the possibility looks high for the rupee to strengthen toward 61 first. And even if the rupee strengthens from the current levels, the upside could be limited to 61 — a very strong resistance level on the chart.

An immediate break below this hurdle looks unlikely and it is expected to keep the medium-term bearish outlook intact. A reversal from here can see the rupee weakening to 63 and 64 levels over the medium term.

Published on February 08, 2015
This article is closed for comments.
Please Email the Editor