Daily Rupee call: Buy rupee in declines

The rupee (INR) last week ended at 73.53, with a loss of 39 paise against the dollar (USD). Thus, on a weekly basis, the local currency closed below the key support of 73.5– a bearish indication. But today, it has opened higher at 73.39. If the rupee strengthens from the current level it is likely to face resistance at 73.15. Subsequent resistance is at 73. On the other hand, if INR depreciates below 73.5, the immediate support is at 73.7. A break below that level can drag it to 74.

Foreign Portfolio investors (FPI) have net bought ₹349 crore so far in the current month, as per the data by the National Securities Depository Limited (NSDL). However, the equity segment, which witnessed an impressive net inflow of ₹47,080 crore in August, has seen a net outflow of ₹3,510 crore this month. Notably, the debt segment is witnessing positive net monthly investments (₹1,422 crore) after six months. Going ahead the trend might change for the month. So, as long as the overall foreign flow is positive, it can help strengthen the rupee.

Foreign reserves

The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday shows that the total foreign reserves increased to a new all-time high of $542 billion as on September 4, it increased by $0.6 billion between August 28 and September 4. Foreign Currency Assets (FCA), the largest component of the reserves, was up by a marginal $0.3 billion to $498.3 during the corresponding period. The value of gold holding went up to $37.5 billion, an increase of $0.3 billion. The foreign reserves has been increasing at a considerable pace and higher reserves is positive for the Indian currency.

Dollar index

The dollar index gained by about 0.7 per cent last week as it closed at 93.33 versus the preceding week’s close of 92.72. Importantly, it stays below the key barrier of 94 and until this level is breached, the likelihood of a sustainable rally is low. The index has begun today’s session marginally lower. Currently trading near 93.2, the nearest support levels are at 92.85 and 92.5.

Trade strategy

The rupee, after opening with a gap-up, is trading with a positive bias. Also, the dollar index is below the key resistance. Hence, for intraday, traders can go long in INR in declines with stop-loss at 73.5.

Supports: 73.4 and 73.5

Resistances: 73.15 and 73