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The rupee (INR), that ended flat last week at 73.13, has today opened marginally higher at 73.08 against the dollar (USD). Last Friday, the local currency faced resistance at 73 and until it stays below this level, the likelihood of further rally is low. If INR depreciates from here, it has support at 73.15. A breach of this level can drag the local currency to 73.3. Subsequent support is at 73.5. In case of bulls gain traction and strengthens above 73, the resistance is at 72.8. Resistance above that level is at 72.5.
The Foreign Portfolio Investors (FPI) have been positive in the domestic market. The net inflow for the current month so far stands at ₹1,039 crore. While the equity has been the best performing segment with net investments amounting to ₹5,245 crore, the debt segment has witnessed a net outflow of ₹4,568 crore. If the foreign money continues to come in, it can help the rupee gain ground against the dollar.
The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday shows that the total foreign reserves increased by $3.6 billion between September 25 and October 2 to $545.6 billion. Foreign Currency Assets (FCA), the largest component of the reserves, was up by $3 billion to $503 billion during the corresponding period. Similarly, the value of gold holding went up to $36.5 billion i.e. an increase of $0.4 billion. High foreign exchange reserves can be an effective tool in keeping the exchange rate stable.
Dollar index
The dollar index closed in the red last week i.e. it posted a loss for two weeks in a row. Thus it has closed below the 21- and 50-day moving averages, keeping the outlook negative. Currently trading around the support level of 93, it is highly likely to break below this level. The nearest support levels below 93 can be spotted at 92.8 and 92.5. A weakening dollar index mean lower demand for the dollar which can be positive for the rupee.
Trade strategy
The rupee is showing a bullish bias and dollar index indicates that the greenback is likely to depreciate further. But INR faces a resistance at 73. Hence, traders can go long in INR with a tight stop-loss if it breaches 73.
Supports: 73.15 and 73.3
Resistances: 73 and 72.8
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