The rupee, which recovered towards the end of last week, has moved above the 83-mark against the dollar again. On Tuesday, the local unit gained 0.1 per cent to end at 82.92.
The downward pressure on the rupee softened as the dollar, which has been strengthening, stabilised over the past week. So, the Indian currency saw a marginal gain over the past week even as fund flows were negative.
According to NSDL, the net FPI flows over the last week stood at $901 million. Besides, the crude oil price remains elevated. So, overall, the rupee is not facing downward pressure, which is largely due to the flat dollar over the past week. Moreover, market experts believe that the Reserve Bank of India (RBI) might have intervened to stabilise the exchange rate.
Technically, as long as the rupee stays above 83, there will not be any threat of a sharp fall. However, dollar appreciation can play spoilsport. Here’s an analysis of the charts.
The rupee, which fell last week, took support at 83.25 and reversed higher. Early this week, it moved above 83, and it is now at 82.92. While the trend has not turned bullish, the price action shows that the selling momentum has dropped.
However, the dollar index (DXY) lies above a key support at 104.30, and until it remains so, the bias will be bullish for the greenback. Thus, DXY rallying to 105.70 is very much a possibility. If that occurs, the rupee might fall below 83 again and retest support at 83.25. In case this level is breached, the rupee might depreciate to 83.50.
On the other hand, if the dollar index slips below 104.30, it can see a downswing to the 103-103.50 range. In this scenario, the rupee can appreciate to 82.50.
Broadly, the bias is still bearish for the rupee as the dollar remains above a key support. Therefore, INR might resume the downtrend and might touch 83.25 or even extend the downtrend to 83.50. The short-term outlook for the Indian currency will turn positive only if the dollar index declines below 104.30. So, the participants should keep a close watch on the dollar’s movement.