The rupee (INR) had to undergo a very volatile session on Wednesday. Despite this, the Indian currency closed marginally higher at 73.22 after making a low of 73.63 against the dollar (USD). The previous close was 73.3. The rupee continues to be the weakest Asian currency this week, losing 1.45 per cent against the dollar. Year-to-date, it has declined by 2.6 per cent.

The one-year forward spread of USD-INR currency pair, that went up to 302 points yesterday, decreased to 296 points by the end of the trading session. Further reduction in spread can be a favourable factor for the domestic unit. Foreign Portfolio Investments (FPI) seems to be on a selling spree since the beginning of the week. FPIs net sold ₹3,821 crores yesterday, equity and debt combined, as per National Securities Depository Limited (NSDL) data. With this, the net sales for the week stands at ₹11,863 crores. The outflow will certainly have an impact on the rupee.

With a close at 73.22 on Wednesday, the rupee remains below the important level of 73 and as long as it stays so, the likelihood of further decline will be more. Support levels can be found at 73.3 and 73.5 whereas resistances are at 72.9 and 72.46.

Dollar index

After posting loss during multiple sessions, the dollar index recovered slightly on Wednesday as it closed at 97.34 against the previous close of 97.15, which is a considerable support. Currently trading at 97.3, the index is trading within two key levels at 97.15 and 97.75 and a break of either of these levels will confirm the next leg of trend.

Trade strategy

The rupee has begun today’s session lower at 73.41 compared to yesterday’s close of 73.22. As the local currency is in a downtrend and it is trading below 73, traders can take a bearish view. Initiate fresh rupee short positions on rallies with 72.9 as stop-loss.

Supports: 73.5 and 73.85

Resistances: 73 and 72.9

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