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BL Research Bureau
The rupee (INR) has gone up sharply so far this week following Jerome Powell’s speech at the Jackson Hole economic symposium. The Fed looks like not in a hurry to start the rate hike cycle even though tapering measures are likely to kick-in this year. Following this, the dollar declined. On Monday, the rupee opened on the front foot and has been rallying so far. Currently trading at around 73, INR is up by 0.1 per cent against USD year-to-date.
Debt market inflows
While the equity market is soaring to new heights, the foreign portfolio investors (FPIs) seem to be more interested in the debt segment of late. The net investments in August stood at ₹16,556 crore according to the National Securities Depository Limited (NSDL), out of which the debt market has seen a net inflow of ₹14,376 crore, including the VRR (voluntary retention route). Equity net inflows stood at ₹2,083 crore. So, the FPI fund flows have been positive for the rupee and going ahead, it is likely to remain so. The equity market hitting new highs might result in more funds flows towards that segment. Nevertheless, irrespective of the final destination of the FPI money, inflows are positive for the local currency.
Charts
Since September last year, the rupee has largely been moving in a sideways band within 72.30 and 75. That said, the rupee took support at 75 in mid-July and has been appreciating. The rally accelerated in the last few sessions and is now hovering at an important level of 73. Going by the price action of the last one year, the Indian unit is likely to advance towards 72.30 in the short term. Nearest support from the current level is at 73.50.
The dollar index, after marking a nine-month high of 93.73 a couple of weeks ago, could not sustain at the highs, it fell back below 93 and so long as it trades below this level, the bias will be bearish. Further fall from here can be positive for the rupee.
Outlook
The domestic currency has been appreciating in the recent weeks and the fund flows are in support of the same. The news around the Fed seems like the rate hike is no imminent even if they start reducing asset purchases. Technically, the rupee chart is bullish and the dollar index is below an important level, giving it a bearish inclination. So, the rupee is likely to head towards 72.50 and 72.30 in the near term.
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