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BL Research Bureau
The rupee (INR) has opened lower today, at 74.07 versus Friday’s close of 73.91 against the dollar (USD). The currency market is expected to witness higher volatility today as the US Federal reserves has cut its benchmark interest by one per cent. The Reserve Bank of New Zealand has reduced it benchmark rate by 75 bps.
On Friday, the rupee gained and moved above 74 against the dollar. Intraday, the Indian currency registered its all-time low of 74.5, before recovering.
The weekly close was nearly flat at 73.91 compared to the previous week’s close of 73.78, even after witnessing considerable volatility throughout the week. The flat close ensured the rupee was one of the best performing Asian currency last week. While other currencies were relatively weaker, only the Hong Kong dollar outperformed the rupee. As per Friday’s closing price, the local currency has lost 3.5 per cent against the dollar for this calendar year.
The Foreign Portfolio Investors continue to sell heavily, weighing on the rupee. As per the latest National Securities Depository Limited (NSDL) data, the net outflow of FPI for the month is at ₹37,955 crore.
If the rupee can advance further, it will face a hurdle at 73.5; above that level, the resistance is at 73.3. On the other hand, if the domestic unit weakens, 74 can act as a support. Subsequent support is at 74.25.
Foreign reserves:
The weekly statistical supplement released by the Reserve Bank of India (RBI) last Friday showed that the foreign reserves continued to increase. As per the report, the reserves have rose by $5.7 billion i.e. the total reserves increased to $487.2 billion from $481.5 billion. Foreign Currency Assets (FCA), the largest component of the reserves went up by around $5.3 billion to $451.1 billion from $445.8 in the same period. The value of gold holdings increased marginally to $31 billion compared to previous week’s $30.7 billion.
Dollar index:
The dollar index witnessed a sharp rally last week after declining in the preceding two weeks. Compared to previous week’s close of 95.95, the index closed at 98.74 last Friday, gaining nearly 3 per cent. The nearest resistance and support level for the index is at 99.25 and 98.45, respectively.
Trade strategy:
The market can be expected to be volatile today. The reduction of rates by the Fed have paved the way for the expectation to rise for an action from the RBI. These factors can keep the currency market volatile today and traders would be better off if they stay on the sideline.
Supports: 74 and 74.25
Resistances: 73.5 and 73.3
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