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BL Research Bureau
The rupee (INR) wrapped up last week with a marginal gain at 73.45 versus the previous week’s close of 73.53 against the dollar (USD). On a weekly basis, the local currency has thus managed to close above the support level of 73.5. Today, the rupee has opened flat at 73.43, and it faces a resistance at 73.3. A breakout of this level can take the domestic currency to 73.15 and 73. But if INR weakens and slips below the support of 73.5, it will most likely decline to 73.7. A breach of this level can drag the rupee to 74.
The Foreign Portfolio Investors (FPI) has made net investments of ₹6,259 crore so far in September according to the data by the National Securities Depository Limited (NSDL). Out of this, the net inflow in equity and debt stands at ₹1,766 crore and ₹2,059. Notably, the ‘hybrid’ segment that includes Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) received the highest – a net inflow of ₹2,315 crore. As long as the foreign inflows continue to come in, the rupee will be firm against the dollar.
Foreign reserves
The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday shows that the total foreign reserves came down slightly, i.e. by $0.35 billion between September 4 and 11 to $541.65 billion. Foreign Currency Assets (FCA), the largest component of the reserves, was down by $0.8 billion to $497.5 billion during the corresponding period. But the value of gold holding went up to $38 billion, i.e. an increase of $0.5 billion. Though the total reserves have moderated, it is still near the all-time high of $542 billion. Foreign reserves can be an effective tool in stabilising the exchange rate of USDINR, and so higher reserves are good for the rupee.
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The dollar index lost about half a percent last week and ended at 92.93 versus its previous week close of 93.33. Today, after a flattish open, the price action is showing a bearish bias. Also, it remains below the critical resistance of 94 and trading below the 21-day moving average. Moreover, the major trend is bearish. Given that, the dollar index is likely to decline from the current level and a weak dollar is positive for the Indian currency.
Trade strategy
The rupee, after beginning the session on a flat note, has been inching up. However, it faces strong resistance at 73.3. Hence, traders can wait for now and go long in INR with a tight stop-loss if its breaches the hurdle at 73.3.
Supports: 73.5 and 73.7
Resistances: 73.3 and 73.15
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