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The sell-off in rupee (INR) continued yesterday as it lost nearly 0.8 per cent against the dollar (USD). The Indian currency marked a fresh 16-month low of 73.34, before ending Tuesday’s session at 73.3. Considering the first two sessions of this week, the rupee is the worst performing Asian currency, declining 1.57 per cent against the dollar. The year-to-date loss as on Tuesday stands at about 2.71 per cent.
The one-year forward spread of the USDINR currency pair has shot up to 295 points from 285 since last Friday, weighing on the domestic currency. Moreover, Foreign Portfolio Investments (FPI) net sold ₹2,510 crore in equity and debt combined, according to National Securities Depository Ltd (NSDL), adding to the tally of ₹8,042 crore of net selling so far this week.
While 73.3 is a good support technically, persisting weakness can drag the rupee lower to 73.5, a considerable support. The subsequent support is at 73.85. On the upside, the price band between 72.9 and 73 will act as a hindrance. Beyond that level, 72.46 is a potential resistance.
Dollar index
The dollar index closed with a loss at 97.15 on Tuesday, extending the decline for the ninth consecutive trading day. While 97.15 is a good support, resistance can be spotted at 97.75 from the current market price of 97.25. The direction of the break of either of the levels at 97.15 or 97.75 will give a hint as to the next leg of the trend.
But the worrying part is the weakness in dollar has not helped the rupee, which has been falling over the past few trading sessions. Following this, a recovery in dollar might add more selling pressure on the rupee.
Trade strategy
The rupee opened with a gain on Wednesday as the market sentiment improved following a 50-bps cut in the benchmark rate by the US Federal Reserve. The domestic currency opened at 73.08, compared to 73.3 – its previous close.
Currently trading at 72.98, the rupee trades between two critical levels at 72.9 and 73.3 that can define the next leg of trend. So, traders can stay on the sidelines until either of these levels are breached.
Either buy rupee with tight stop-loss if it breaks out of 72.9, or short rupee with tight stop-loss if it breaks below 73.3.
Supports: 73.3 and 73.5
Resistances: 72.9 and 72.46
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