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The Indian rupee witnessed a sharp fall last week. The domestic currency tumbled to a new low of 87.58 against the dollar. The rupee remained weak all through the week in spite of the dollar index coming down during the week.
The dollar index was volatile last week. It spiked to a high of 109.88 and then fell back sharply to a low of 107.30. On Friday it managed to recover and close the week at 108.04. The US 10Yr Treasury Yield witnessed a strong rise on Friday after the jobs data release. That gave some relief for the greenback. The 10Yr yield surged from a low of 4.38 per cent to 4.5 per cent on Friday.
The US unemployment rate dipped to 4 per cent in January from 4.1. per cent a month ago. That increased the speculation in the market that the Federal Reserve could retain the interest rates at current levels and delay the next rate cut.
The US Consumer Price Index (CPI) data release is due this week on Wednesday. That will need a close watch.
The Indian rupee (USDINR: 87.43) continues to get beaten down badly. The domestic currency opened with a wide gap-down on Monday and tumbled to a new low 87.58. It managed to recover slightly from there to close the week at 87.43. However, in the off-shore market, the rupee declined again and closed much lower at 87.63.
That leaves the chances high for the rupee to open with a gap-down again this week as well. The outlook remains bearish. Resistance is at 87.30. Rupee can fall further to 88.30 and even 89 in the coming weeks.
On the chart, broadly the dollar index (108.04) has been oscillating in a range for some time now. The trading range is 107-110. That leaves the near-term outlook unclear. We may have to wait for a breakout on either side of 107-110 to get clarity on the next move.
A break below 107 can drag the index down to 106. On the other hand, a breakout above 110 can boost the bullish momentum. It will indicate the resumption of the overall uptrend. That breakout can take the dollar index up to 114.
The US 10Yr Treasury Yield (4.5 per cent) has a key resistance in the 4.55-4.60 per cent region. The yield has to breach 4.6 per cent to ease the downside pressure. Only then a rise to 4.8 per cent will come into the picture. As long as the yield stays below 4.6 per cent, a fall to 4.3-4.25 per cent cannot be ruled out.
This 4.25 per cent is a crucial support. A bounce from this support can take the yield up to 4.5 per cent and higher again. But a break below 4.25 per cent will be bearish to see 4 per cent on the downside.
The strong bounce from the low of 1.0141 in euro (EURUSD: 1.0328) failed to sustain. The euro has come down from a high of 1.0442. That leaves the bias negative. Resistance is at 1.0420. Failure to breach this hurdle can take the euro down to 1.0150-1.01 in the near term. It will also keep the doors open for the euro to reach parity against the dollar.
A break above 1.0420 is needed to ease the downside pressure. If that happens, a rise to 1.06-1.0650 is possible in the short term.
Published on February 8, 2025
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